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You are given the following information about The Countdown Inc.: This company can borrow money by selling corporate bonds. If it does so, the
You are given the following information about The Countdown Inc.: This company can borrow money by selling corporate bonds. If it does so, the interest rate on this debt will be 6 %. a. Right now, though, it does not have any bonds. It is all-equity and the annual cost of equity equals 13 %. It expects to be receiving $111,000 in annual EBIT forever. Its corporate income is taxed each year at 25 % tax rate. a. The current market value of this company equals: (Do not round your intermediate calculations. Only round your final answer to 2 decimal places, e.g., 32.16.) b. Next, recalculate the company's current market value if it borrows $235,000 and spends it on buying back its common stock shares. (Do not round your intermediate calculations. Only round your final answer to 2 decimal places, e.g., 32.16.) b. Value of the firm Value of the firm
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a Market Value EBIT Cost of Equity Cost of Debt 111000 13 6 111000 7 15871428...Get Instant Access to Expert-Tailored Solutions
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