Firm Value

Kline Construction is an all-equity firm that has projected perpetual EBIT of $332,000. The current cost of equity is 12.6 percent and the tax rate is 35 percent. The company is in the process of issuing $948,000 worth of perpetual bonds with an annual coupon rate of 6.6 percent at par. What is the value of the levered firm?

Multiple Choice

$1,973,748

$1,902,998

$1,712,698

$1,541,429

$2,044,498