Pegar N S Combinar y centrar % 000 0 00 00 0 Insertar Elir Formato Dar formato Estilos condicional como tabla de celda D19 A D 4 x fx =D17+(D8*D9) B Chapter 16 Question 17 E F G H 1 J L M N o P Q R R Input Area: EBIT Tax rate Outstanding debt Interest rate Unlevered cost of capital 17. MM Tool Manufacturing has an expected EBIT of $63,000 in perpetuity and a tax rate of 21 percent. The firm has $115,000 in outstanding debt at an interest rate of 7 percent and its unlevered cost of capital is 12 percent. What is the value of the company according to MM Proposition I with taxes? Should the company change its debt-equity ratio the goal is to maximize the value of the company? Explain. 1 2 3 4 5 6 7 8 9 9 10 11 12 13 14 15 16 42 17 18 19 20 20 21 22 23 24 24 Output Area: Vu #DIV/0! V #DIV/0!! Applying M&M Proposition I with taxes, the firm has increased its value by issuing debt. As long as M&M Proposition I holds, that is, there are no bankruptcy costs and so forth, then the company should continue to increase its debt/equity ratio to maximze the value of the firm. 25 26 27 28 29 30