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Ghirardelli currently has no loans. The company's cost of equity is 14 percent annually. Ghirardelli expects a cash inflow of $116,000 in annual earnings before
Ghirardelli currently has no loans. The company's cost of equity is 14 percent annually. Ghirardelli expects a cash inflow of $116,000 in annual earnings before interest and taxes, forever. The company faces a 25 % tax rate on all taxable income. If Ghirardelli does decide to borrow money, it will do so by issuing corporate bonds. If this happens, the interest rate on the bonds will be 8 %. |
a. | Currently, the market value of unleveled Ghirardelli is _____: (Do not round your intermediate calculations. Only round your final answer to 2 decimal places, e.g., 32.16.) |
b. | Ghirardelli's current market value will change to _______ if it borrows $260,000 and uses it to back its shares of stock. (Do not round your intermediate calculations. Only round your final answer to 2 decimal places, e.g., 32.16.) |
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