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The company Investor AB's EBIT amounted to SEK 1 billion in 2020. The company's market value is SEK 12 billion and it is financed 100%
The company Investor AB's EBIT amounted to SEK 1 billion in 2020. The company's market value is SEK 12 billion and it is financed 100% with equity. The company buys back its shares by issuing bonds worth SEK 6 billion, with a coupon rate of 8% and a perpetual maturity. Justify your answers to a) and b) in detail for points (5p). a) Calculate the tax shield for the company provided that the tax is 40%. b) Calculate the value of the whole company.
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