Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Bruce & Co. expects its EBIT to be $95,000 every year forever. The company can borrow at 7 percent. The company currently has no debt,

Bruce & Co. expects its EBIT to be $95,000 every year forever. The company can borrow at 7 percent. The company currently has no debt, and its cost of equity is 13 percent.

If the tax rate is 35 percent, what is the value of the company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Value of the company $

What will the value be if the company borrows $133,000 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 comapny $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Shape Up Your Finances The Personal Finances Handbook

Authors: Ian Birt

1st Edition

0734608268, 978-0734608260

More Books

Students also viewed these Finance questions