Question
The current market value of Mathers Manufacturing Limited is $20,500,000. The company has no debt. a) If there are no taxes and the EBIT is
The current market value of Mathers Manufacturing Limited is $20,500,000. The company has no debt.
a) If there are no taxes and the EBIT is $3 million, what is the cost of equity? What is the WACC?
b) If the tax rate is 40%, what is the EBIT if the unlevered cost of equity is 14.63%? What is the WACC? (Assume there is no cost of financial distress and general M&M assumptions apply)
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International Finance Theory and Policy
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
10th edition
978-0133425895, 133425894, 978-0133423631, 133423638, 978-0133423648
