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ROUND TO 4 DECIMAL PLACES AND HANDWRITTEN SOLUTIONS ONLY, NO USE OF COMPUTER ALLOWED BBC Inc. currently has 850 shares outstanding, selling at $16 per

ROUND TO 4 DECIMAL PLACES AND HANDWRITTEN SOLUTIONS ONLY, NO USE OF COMPUTER ALLOWED

BBC Inc. currently has 850 shares outstanding, selling at $16 per share. Its 9% annual coupon, perpetual debt has a par value of $8,000 and is trading to yield 8%. The annual EBIT is expected to be $4,000 forever. The present value of bankruptcy costs is $0. The tax rate is 25%.

What is the unlevered firm value?
What is the unlevered cost of equity?
What is the cost of equity?
What is the weighted average cost of capital?
Recalculate parts 1, 2, 3, and 4 if the present value of the bankruptcy costs is $1,470.

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