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Hidtke & Co. expects its EBIT to be $68,400 every year forever. The firm can borrow at 9 percent. Hidtke currently has no debt, and
Hidtke & Co. expects its EBIT to be $68,400 every year forever. The firm can borrow at 9 percent. Hidtke currently has no debt, and its cost of equity is 14 percent. Assume the tax rate is 35 percent. A) What is the value of the firm? (5 pts) B) What will the value be if the company borrows $130,000 and uses the proceeds to repurchase shares? (5 pts)
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