Question
Evergreen Ltd. expects it EBIT to be $80,000 every year forever. The firm can borrow at 8%. It has no debt and the cost of
Evergreen Ltd. expects it EBIT to be $80,000 every year forever. The firm can
borrow at 8%. It has no debt and the cost of equity is 10%. If the tax rate is 20%,
what is the value of the firm? What will the value be if it borrows $50,000 and
repurchase the outstanding shares and the cost of equity, WACC after
recapitalization? (4 Decimal Places)
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Financial Management Principles and Application
Authors: Arthur J. Keown, J. William Petty, David F. Scott, Jr.
10th edition
536514119, 536514110, 978-0536514110
