Question
Change Corporation expects an EBIT of $31,200 every year forever. The company currently has no debt, and its cost of equity is 11 percent. The
Change Corporation expects an EBIT of $31,200 every year forever. The company currently has no debt, and its cost of equity is 11 percent.
The corporate tax rate is 22 percent. a. What is the current value of the company?
b. Suppose the company can borrow at 6 percent. What will the value of the firm be if the company takes on debt equal to 50 percent of its unlevered value? What if it takes on debt equal to 50 percent of its levered value?
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National Finance A Chinese Perspective
Authors: Yunxian Chen, Heming Yong
1st Edition
9813360917, 978-9813360914
