UNLEV has an expected perpetual EBIT = $4,000. The unlevered cost of capital = 15% and there are 20,000 shares of stock outstanding. The firm
UNLEV has an expected perpetual EBIT = $4,000. The unlevered cost of capital = 15% and there are 20,000 shares of stock outstanding. The firm is considering issuing $8,800 in new par bonds to add financial leverage to the firm. The proceeds of the debt issue will be used to repurchase equity. The cost of debt = 10% and the tax rate = 34%. What is the value of UNLEV's equity after the restructuring?
| $12,600 | ||
| $11,792 | ||
| $12,819 | ||
| $13,592 |
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Authors: Jonathan Berk, Peter DeMarzo
4th Global Edition
1292158336, 9781292158334
