Question
Elzear & Co. expects its EBIT to be $49,000 every year forever. The firm can borrow at 8%. Elzear currently has no debt, and its
Elzear & Co. expects its EBIT to be $49,000 every year forever. The firm can borrow at 8%. Elzear currently has no debt, and its cost of equity is 11%. (Round the final answers to 2 decimal places. Omit $ sign in your response.)
If the tax rate is 35%, what is the value of the firm?
Value of the firm $
What will the value be if the company borrows $142,000 and uses the proceeds to repurchase shares?
Value of the firm $
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Financial Management Concepts and Applications
Authors: Stephen Foerster
1st edition
013293664X, 978-0132936644
