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Change Corporation expects its EBIT to be $107,000 every year forever. The firm can borrow at 7 percent. The company currently has no debt, and
Change Corporation expects its EBIT to be $107,000 every year forever. The firm can borrow at 7 percent. The company currently has no debt, and its unlevered cost of capital is 11 percent and the tax rate is 21 percent. If the company borrows $250,000 according to M&M Propositions with taxes: a. What is the value of the unlevered firm? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the value of the levered firm? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What is the cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) d. What is the WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Value of unlevered firm b. Value of levered firm c. Cost of equity d. WACC
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