Question
Running Deere firm is considering a target capital structure 35% debt and 65% equity. The cost of equity for an unlevered firm of Running Deere
Running Deere firm is considering a target capital structure 35% debt and 65% equity. The cost of equity for an unlevered firm of Running Deere is 12% and the before tax cost of new debt issued is constant at 8%.
Calculate the Market Value of Levered Firm and the Market Value of Debt from Levered Firm if its operating income (EBIT) is $2,000,000 and corporate tax rate is 35%
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Financial Modeling
Authors: Simon Benninga, Tal Mofkadi
5th Edition
0262046423, 9780253337825
