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PT Indah Berkah expects its EBIT to be Rp 50 Billion every year for ever. The firm can borrow at 11 per cent. PT IB

PT Indah Berkah expects its EBIT to be Rp 50 Billion every year for ever. The firm can borrow at 11 per cent. PT IB currently has no debt, and its cost of equity is 22 per cent. If the tax rate is 25 per cent, what is thevalue of the firm? What will be the value be if PT IB borrows Rp60 Billion and uses the proceeds to repurchase shares? what is thecost of equityafter

recapitalization?What is the WACC? What are the implications for the firm's capital structure

decision?

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