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Ghirardelli currently has no loans. The company's cost of equity is 13 percent annually. Ghirardelliexpects a cash inflow of $103,000 in annual earnings before interest
Ghirardelli currently has no loans. The company's cost of equity is 13 percent annually. Ghirardelliexpects a cash inflow of $103,000 in annual earnings before interest and taxes,forever.The company faces a 22 % tax rate on all taxable income. If Ghirardelli does decideto borrow money, it will do so by issuingcorporate bonds. If this happens, the interest rate on the bondswill be 7 %. |
a. | Currently, themarket 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 $193,000 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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