Question:

Firm Value

Young Corporation expects and EBIT of $21,450 every year forever. The company currently has no debt, and it's cost of equity is 14 percent. The corporate tax rate is 35 percent.

1. What is the current value of the firm?
2. Suppose the company can borrow at 9 percent. What will the value of the firm be if the company takes on debt equal to 50 percent of its unlevered value? What if it takes on debt equal to 100 percent of its unlevered value?
3. Whatwillthevalueofthefirmbeifthecompanytakesondebtequalto50percentofitsleveredvalue?Whatifthecompanytakesondebtequalto100percentofitsleveredvalue?

Please provide explanation/steps of how each answer is calculated. Thank you.