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XYZ is an all equity financed firm with a constant EBIT of $1.75 million. The company does not pay any taxes currently. The company has
XYZ is an all equity financed firm with a constant EBIT of $1.75 million. The company does not pay any taxes currently. The company has a cost of equity of 20% and 500,000 shares outstanding.
The company is considering restructuring its capital by issuing $3,937,500 in debt and buying back some of its outstanding shares. The required rate of return on debt of the company is 8%. Determine the value of XYZ company after this capital structure change.
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