Question
Elzear & Co. expects its EBIT to be $75,000 every year forever. The firm can borrow at 10%. Elzear currently has no debt, and its
Elzear & Co. expects its EBIT to be $75,000 every year forever. The firm can borrow at 10%. Elzear currently has no debt, and its cost of equity is 14%.
If the tax rate is 35%, what is the value of the firm?
Value of the firm$
What will the value be if the company borrows $152,000 and uses the proceeds to repurchase shares?
Value of the firm$
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The Legal Environment Today Summarized Case Edition
Authors: Roger LeRoy Miller
8th Edition
130526276X, 978-1305279407, 1305279409, 978-1305704930, 1305704932, 978-1305262768
