Question
Cavo Corporation expects an EBIT of $19,750 every year forever. The company currently has no debt, and its cost of equity is 15 percent. The
Cavo Corporation expects an EBIT of $19,750 every year forever. The company currently has no debt, and its cost of equity is 15 percent. The corporate tax rate is 35 percent. a. What is the current value of the company? (Round your answer to 2 decimal places. (e.g., 32.16)) Current value $ b-1 Suppose the company can borrow at 10 percent. What will the value of the firm be if the company takes on debt equal to 50 percent of its unlevered value? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Value of the firm $ b-2 Suppose the company can borrow at 10 percent. What will the value of the firm be if the company takes on debt equal to 100 percent of its unlevered value?(Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Levered value $ c-1 What will the value of the firm be if the company takes on debt equal to 50 percent of its levered value? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Value of the firm $ c-2 What will the value of the firm be if the company takes on debt equal to 100 percent of its levered value? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Levered value $
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