Finance

According to the information for two firms (levered and unlevered firms) given below, compute the value of the levered firm including the values of the tax-shield benefits of the debt and bankruptcy-agency costs. Assuming zero growth and 100% dividend payout, permanent debt, so treated as a perpetuity.

Debt amount for levered firm : $50.000 NOI for each firm : $40.000 Interest rate for the debt : 10% Stock market return : 12% Tax rate for each firm : 20% Treasury bill rate : 5% Present value for bankruptcy-agency cost : $38.000 Beta () coefficient for unlevered firm : 0.9