Question
Galaxy Enterprises has earnings before interest and taxes of $9 million and $90 million of debt outstanding with a required rate of return of 7.3%.
Galaxy Enterprises has earnings before interest and taxes of $9 million and $90 million of debt outstanding with a required rate of return of 7.3%. The required rate of return on assets in the industry is 12%. The corporate tax rate is 21%, but there are no personal taxes. The present value of Galaxy’s bankruptcy costs is $18 million. Compute Galaxy’s firm value.
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Contemporary Financial Management
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow
10th Edition
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