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Meyer & Co. expects its EBIT to be $91,000 every year forever. The firm can borrow at 4 percent. Meyer currently has no debt, and

Meyer & Co. expects its EBIT to be $91,000 every year forever. The firm can borrow at 4 percent. Meyer currently has no debt, and its cost of equity is 11 percent.

If the tax rate is 35 percent, what is the value of the firm?

Ans: 537,727

What will the value be if the company borrows $136,000 and uses the proceeds to repurchase shares?

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