Question
(For this problem, assume that all Miller-Modigliani assumptions hold.) Apples & Oranges is currently an all-equity firm. Its management expects its Earnings Before Interest and
(For this problem, assume that all Miller-Modigliani assumptions hold.)
Apples & Oranges is currently an all-equity firm. Its management expects its Earnings Before Interest and Taxes to equal $430,000 every year in the future. Its cost of equity is 13%. The firm faces a 35% tax rate for all of its taxable income each year.
Apples & Oranges is contemplating taking a $560,000 loan at 5.00% annual interest rate.
The values in the table below are related to the firm's valuation. Fill it out! Round all dollar values to WHOLE dollar, and do NOT use the "$" signs. (You can type with or without the commas.)
If the firm remains all-equity | If the firm takes the $560,000 loan | |
Firm's equity value | $ | $ |
Firm's debt value | $ | $ |
Firm's total value | $ | $ |
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