Question
Educators, Inc. expects an EBIT of $7,000 every year forever. The firm currently has no debt, and its cost of equity is 17 percent. The
Educators, Inc. expects an EBIT of $7,000 every year forever. The firm currently has no debt,
and its cost of equity is 17 percent. The firm can borrow at 8 percent and the corporate tax rate is
34 percent. What will the value of the firm be if it converts to 50 percent debt?
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Multinational Business Finance
Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett
14th edition
133879879, 978-0133879872
