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Jellybean Co. expects EBIT of $150,000 every year forever. Jellybean Co. currently has no debt and its cost of equity is 12%. The firm can
Jellybean Co. expects EBIT of $150,000 every year forever. Jellybean Co. currently has no debt and its cost of equity is 12%. The firm can borrow at 4%. The corporate tax rate is 35%. 812500 What is the value of the firm? Enter your answer rounded to two decimal places. Correct response: 812,500+0.01 Click "Verify" to proceed to the next part of the question. This question has 4 parts, so you will be clicking verify 4 times. Given that the firm has a value of $812,500 when it is all equity, what will be the value of the firm if Jellybean Co. borrows $210,000 of permanent debt and uses the proceeds to buy back stock? Enter your answer rounded to two decimal places. 886000 Correct response: 886,000+0.01 Click "Verify" to proceed the next part of the question. Given that the firm has a value of $812,500 when it is all equity, how can Jellybean Co. maximize the value of the firm? What will be the maximum value if there are no costs to financial distress? Enter your answer rounded to two decimal places 1250000 Correct response: 1,250,000+0.02 Click "Verify" to proceed to the next part of the question. Suppose that with $210,000 of debt, there is a 17% probability of financial distress, in which case the firm will have a present value of $270,000. What is the value of the firm in this case? Recall that the value of the firm with $210,000 debt and no costs to financial distress was $886,000. Enter your answer rounded to two decimal places. Number
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