Question
Lazare Corporation expects an EBIT of $19,750 every year forever. Lazare currently has no debt, and its cost of equity is 15%. The firm can
Lazare Corporation expects an EBIT of $19,750 every year forever. Lazare currently has no debt, and its cost of equity is 15%. The firm can borrow at 10%. If the corporate tax rate is 35%, what is the value of the firm? What will the value be if the company converts to 50% debt? To 100% debt?
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Case Studies In Finance
Authors: Robert Bruner, Kenneth Eades, Michael Schill
6th Edition
0073382450, 978-0073382456
