Question
The current expected EBITDA of Funny co. stock is $15 million each year. The unlevered return on equity is 12%. The current debt value is
The current expected EBITDA of Funny co. stock is $15 million each year. The unlevered return on equity is 12%. The current debt value is $80 million and it is kept constant. Assume that the corporate tax rate is 26% and that there is no personal taxation. If the corporate tax rate is unexpectedly decreased to 24%, what is the equity return caused by this event?
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To calculate the equity return caused by the decrease in the corporate tax rate well use the formula ...
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Fundamentals of Corporate Finance
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford, David A. Stangeland, Andras Marosi
1st canadian edition
978-0133400694
