Chapter $13$: M&M Case II$,$ Proposition I $-$ Value of a Levered Firm

Prospero Inc. expects an EBIT of $$42,000$ every year forever, which means the value of the

company is EBIT$*$ rate$)/$WACC$.$ The company currently has no debt, and its cost of

equity is $12\mathrm{.}1\%,$ which means its unlevered WACC is currently $12\mathrm{.}1\%.$ The tax rate is $21\%.$

The firm is planning to issue $$60,000$ in debt and repurchase some of its equity with the

proceeds. Prospero's before$-$tax cost of debt is $6\mathrm{.}1\%.$ There are no bankruptcy costs. What

will be the value of the firm once it has leveraged itself?

Do not round intermediate steps.

Note: Enter your number with TWO decimals and without the dollar sign. That is$,$ if your

answer is $$24\mathrm{.}542,$ enter $24\mathrm{.}54.$