Question
Stevenson's Bakery is an all-equity firm that has projected perpetual EBIT of $177,000 per year. The cost of equity is 12.7 percent and the tax
Stevenson's Bakery is an all-equity firm that has projected perpetual EBIT of $177,000 per year. The cost of equity is 12.7 percent and the tax rate is 39 percent. The firm can borrow perpetual debt at 6.5 percent. Currently, the firm is considering converting to a debtequity ratio of .87. What is the firm's levered value?
a) $850,157
b) $765,142
c) $1,004,413
d) $1,081,676
e) $927,285
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Technology And Finance Challenges For Financial Markets Business Strategies And Policy Makers
Authors: Morten Balling, Frank Lierman, Andy Mullineux
1st Edition
041529827X, 978-0415298278
