Question
Lazare Corporation expects an EBIT of $26,500 every year forever. Lazare currently has no debt, and its cost of equity is 15%. The firm can
Lazare Corporation expects an EBIT of $26,500 every year forever. Lazare currently has no debt, and its cost of equity is 15%. The firm can borrow at 10%. (Do not round intermediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.)
a. If the corporate tax rate is 35%, what is the value of the firm?
Value of the firm $
b. What will the value be if the company converts to 40% debt?
Value of the firm $
c. What will the value be if the company converts to 100% debt?
Value of the firm $
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The Economics Of Money Banking And Finance
Authors: Howells, Keith Bain
3rd Edition
0273693395, 978-0273693390
