Question
The CFO of Carnival Prizes expects its expected earnings before interest and taxes to be $100,000 every year forever. The company currently has no debt,
The CFO of Carnival Prizes expects its expected earnings before interest and taxes to be $100,000 every year forever. The company currently has no debt, and its cost of equity is 15%.
Hints: Use M&M Proposition I and II with taxes
(1) If the tax rate is 23%, what will the value be if the company borrows $120,000 and used the proceeds to repurchase shares? the company has A pretax cost of debt is 8 percent. What is the cost of equity after recapitalization? And What will the WACC be after recapitalization?
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10 Ways To Get Rich From Futures Trading
Authors: Giuseppe Scuti
1st Edition
1983398411, 978-1983398414
