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The firm want to add some leverage to their firm as they are running their business at a 0% debt level. The firm has a

The firm want to add some leverage to their firm as they are running their business at a 0% debt level. The firm has a projected EBIT of $198,000 and can issue debt at 5.8% per annum. They wish to increase their D/E ratio to 1.08 at the end of the year. Deckland estimates their cost of equity to be 14.1% and pays 34% in taxes per year.

what is the firm value after it adds this leverage to the firm?

Multiple Choice

  • $926,809

  • $1,174,305

  • $1,090,426

  • $834,128

  • $1,008,617

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