Individual Project FIN 251 Fall 2020 Due date: Nov 18 th Wednesday Assuming that there is an
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Individual Project
FIN 251 Fall 2020
Due date: Nov 18th Wednesday
Assuming that there is an unlevered firm and a levered firm. The basic information is given by the following table.
Table1: Information of the firms
|
| Unlevered firm | Levered firm |
| EBIT | 10000 | 10000 |
| Interest | 0 | 3200 |
| Taxable income |
|
|
| Tax (tax rate: 34%) |
|
|
| Net income |
|
|
| CFFA |
|
|
Assuming that cost of debt =8%; unlevered cost of capital =10%; systematic risk of the asset is 1.5
- Fill in the blanks
- What is the present value of the tax shield?
- What is the size of debt?
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