Question
TechnoLink Berhad is currently an unlevered firm with a weighted average cost of capital (WACC) of 25 percent. The earnings before interest and taxes is
TechnoLink Berhad is currently an unlevered firm with a weighted average cost of capital (WACC) of 25 percent. The earnings before interest and taxes is forecasted to remain at RM80,000.00 annually. The firm wishes to invest in a new project which requires them to borrow RM50,000.00 from a local bank that charges 14 percent interest per annum. The current tax rate for the company is 24 percent.
REQUIRED: Calculate the following:
i. value of the firm without debt
ii. value of the firm with debt
iii. value of equity after market capitalisation
iv. cost of equity after market capitalisation
v. weighted average cost of capital (WACC) after market capitalisation
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Financial Accounting Tools for Business Decision Making
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
7th edition
978-1118344262, 111834426X, 1118162285, 978-1118562208, 1118562208, 978-1118162286
