Question
KN&J expects its EBIT to be $138,000 every year forever. The firm can borrow at 10 percent. KN&J currently has no debt and its cost
| KN&J expects its EBIT to be $138,000 every year forever. The firm can borrow at 10 percent. KN&J currently has no debt and its cost of equity is 17.2 percent. The tax rate is 35 percent. What will the value of KN&J be if the firm borrows $50,000 and uses the loan proceeds to repurchase shares? |
A.
| $539,012 |
B.
| $381,588 |
| C. $571,512 |
D.
| $346,600 |
| E. $578,900 |
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Applied Conic Finance
Authors: Dilip Madan, Wim Schoutens
1st Edition
1107151694, 978-1107151697
