Question
Q.9 Tool Manufacturing has an expected EBIT of $57,000 in perpetuity and a tax rate of 21 percent. The firm has $134,000 in outstanding
Q.9 Tool Manufacturing has an expected EBIT of $57,000 in perpetuity and a tax rate of 21 percent. The firm has $134,000 in outstanding debt at an interest rate of 5.35 percent, and its unlevered cost of capital is 10.3 percent. What is the value of the firm according to M&M Proposition I with taxes? Should the company change its debt-equity ratio if the goal is to maximize the value of the firm? Explain.
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Corporate Finance Core Principles and Applications
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
3rd edition
978-0077971304, 77971302, 978-0073530680, 73530689, 978-0071221160, 71221166, 978-0077905200
