Question
Winter's Toylandhas expected earnings before interest and taxes of $48,900, an unlevered cost of capital of 14.5 percent, and a tax rate of 34 percent.
Winter's Toylandhas expected earnings before interest and taxes of $48,900, an unlevered cost of capital of 14.5 percent, and a tax rate of 34 percent. The company also has $8,000 of debt that carries a 7 percent coupon. The debt is selling at par value. What is the value of this firm?
VU= [$48,900 (1 - 0.34)]/0.145 = $222,579.31
VL= $222,579.31 + 0.34 ($8,000) = $225,299.31
If the number of shares outstanding is 100,000, what will be the stock price?
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Marketing
Authors: Roger Kerin, Steven Hartley, William Rudelius
16th Edition
9781264218752
