Question
The Aggie Company has EBIT of $50,000 and market value debt of $100,000 outstanding with a 9% coupon rate. The cost of equity for an
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The Aggie Company has EBIT of $50,000 and market value debt of $100,000 outstanding with a 9% coupon rate. The cost of equity for an all equity firm would be 14%. Aggie has a 35% corporate tax rate. Investors face a 20% tax rate on debt receipts and a 15% rate on equity. Determine the value of Aggie.
a. $263,080
b. $120,000
c. $258,537
d. $162,948
e. $332,143
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Broadcasting Finance In Transition
Authors: Jay G. Blumler, T. J. Nossiter
1st Edition
0195050894, 978-0195050899
