Question
Theresas belongs to Harvester, which has expected earnings before interest and tax (EBIT) of 45,000 in perpetuity and a tax rate of 30%. Harvester has
Theresas belongs to Harvester, which has expected earnings before interest and tax (EBIT) of 45,000 in perpetuity and a tax rate of 30%. Harvester has 60,000 in outstanding debt at an interest rate of 8%. The unlevered cost of capital is 12%.
Should Harvester change its debt-equity ratio if the goal is to maximize the value of the firm? Explain.
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Public Finance In Theory And Practice
Authors: Richard Abel Musgrave, Peggy B. Muscrave
5th Edition
0070441278, 978-0070441279
