Question
I am using this problem to study for my final Calvert corporation expects an EBIT of $22,300 every year forever. The company currently has no
I am using this problem to study for my final
Calvert corporation expects an EBIT of $22,300 every year forever. The company currently has no debt and its cost of equity is 15 percent.
a. what is the current value of the company
b. suppose the company can borrow at 10 percent. if the corporate tax rate is 21 percent, what will the value of the firm be if the company takes on debt equal to 50 percent of its unlevered value? What if it takes on debt to equal 100 percent of its unlevered value?
c. What will the value of the firm be if the company takes on debt equal to 50 percent of its levered value? What if the company takes on debt equal to 100 percent of its levered value?
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