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Bruce & Co. expects its EBIT to be $87,000 every year forever. The firm can borrow at 12 percent. Bruce currently has no debt, and
Bruce & Co. expects its EBIT to be $87,000 every year forever. The firm can borrow at 12 percent. Bruce currently has no debt, and its cost of equity is 16 percent. |
If the tax rate is 35 percent, what is the value of the firm? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16)) |
Value of the firm | $ |
What will the value be if Bruce borrows $160,000 and uses the proceeds to repurchase shares? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16)) |
Value of the firm | $ |
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