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Tempest Corporation expects an EBIT of $41,000 every year forever. The company currently has no debt, and its cost of equity is 15 percent. The
Tempest Corporation expects an EBIT of $41,000 every year forever. The company currently has no debt, and its cost of equity is 15 percent. The tax rate is 25 percent. |
PLEASE ANSWER PART C
a. | What is the current value of the company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
b-1. | Suppose the company can borrow at 11 percent. What will the value of the firm be if the company takes on debt equal to 60 percent of its unlevered value? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
b-2. | Suppose the company can borrow at 11 percent. What will the value of the firm be if the company takes on debt equal to 100 percent of its unlevered value? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
c-1. | What will the value of the firm be if the company takes on debt equal to 60 percent of its levered value? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
c-2. | What will the value of the firm be if the company takes on debt equal to 100 percent of its levered value? (Do not roun |
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