Question
Q8. UNLEV has an expected perpetual EBIT = $4,000. The unlevered cost of capital = 15% and there are 20,000 shares of stock outstanding. The
Q8. UNLEV has an expected perpetual EBIT = $4,000. The unlevered cost of capital = 15% and there are 20,000 shares of stock outstanding. The firm is considering issuing $8,800 in new par bonds to add financial leverage to the firm. The proceeds of the debt issue will be used to repurchase equity. The cost of debt = 10% and the tax rate = 34%. There are no flotation costs. What is the value of UNLEV after the restructuring?
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Practical Financial Management
Authors: William R. Lasher
8th edition
1305637542, 978-1305887237, 1305887239, 978-1305637542
