The Ndovu Limited has EBIT of $30 million for the current year. On the firm balance sheet, there

is$90 million of debt outstanding that carries a coupon rate of 9 percent. Investors seek a return

of 12 percent on the firm, and the firm has a corporate tax rate of 40% . What isthe value of the

firm?

CAPITAL STRUCTURE The Ndovu Limited has EBIT of $30 million for the current year. On the firm balance sheet, there is$90 million of debt outstanding that carries a coupon rate of 9 percent. Investors seek a return of 12 percent on the firm, and the firm has a corporate tax rate of 40% . What isthe value of the firm? (HINT- Be guided by MM hypothesiswithcorporate taxes) (10mks)