Question
The Aggie Company has EBIT of $70,000 and market value debt of $100,000 outstanding with a 9% coupon rate. The cost of equity for an
The Aggie Company has EBIT of $70,000 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.
| $258,537 | |
| $120,000 | |
| $355,938 | |
| $162,948 | |
| $263,080 |
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Public Finance
Authors: Richard W. Tresch
2nd Edition
0126990514, 978-0126990515
