Question
Company A (100% equity) is valued at $15,000,000 and Company B (which has $3,000,000 in long debt with an interest rate of 8%). The tax
Company A (100% equity) is valued at $15,000,000 and Company B (which has $3,000,000 in long debt with an interest rate of 8%). The tax rate is 30%. Both A & B have identical after-tax profit $1,200,000 and it is given that both have identical operating risk profile and identical pretax income. Calculate:
(a) Value of B
(b) Capital Structure Mix of B
(c) Cost of capital for A & B
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Cases In Healthcare Finance
Authors: George H. Pink, Paula H. Song
7th Edition
1640553177, 978-1640553170
