Question
You estimate the market value of the company. The value of the firm if it were unlevered is $600 million. The company has long-term debt
You estimate the market value of the company. The value of the firm if it were unlevered is $600 million. The company has long-term debt $20 million. Assume the company will increase the debt to $25 million for next year, $28 million for one year after and $30 million for two-year after. After that, the company will keep debt level as $30 million for the remaining future. Company’s corporate tax rate is 20% and the current cost of debt is 5%. Both will remain the same as current year in the future. what is the current stock price per share?
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Intermediate Accounting
Authors: J. David Spiceland, James Sepe, Mark Nelson
6th edition
978-0077328894, 71313974, 9780077395810, 77328892, 9780071313971, 77395816, 978-0077400163
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