Question
Consider two firms Alpha and Omega that are identical except for capital structure. Each firm expects EBIT of $840,000 each year forever. Alpha has a
Consider two firms Alpha and Omega that are identical except for capital structure. Each firm expects EBIT of $840,000 each year forever. Alpha has a cost of equity of 12% and firm Omega has $2.0 million in perpetual debt with a coupon rate of 10%. Assume Case I no tax
What is the value of each firm and what is the cost of capital for each firm?
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The Future For Investors
Authors: Jeremy Siegel
1st Edition
140008198X, 978-1400081981
