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haydengraves69
18.03.2020 •
Business
New School Inc. expects an EBIT of $7,000 every year forever. The firm currently has no debt, and its cost of equity is 15 percent. The firm can borrow at 8 percent and the corporate tax rate is 34 percent. What will the value of the firm be if it converts to 50 percent debt?
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Ответ:
The value of firm is $32,032
Explanation:
Unlevered Value is the value of firm calculated purely on the equity portion of fund. Levered value is the value which includes the value of loan in it.
As per given data
EBIT = $7,000
Net Income = $7000 x ( 1 - 0.34) = $4,620
Unlevered value of the firm = $4,620 / 15% = $30,800
As given debt portion is 50%
Levered value of the firm = $30,800 + 8% x 50% x 30,800 = $30,800 + $1,232 = $32,032
Ответ:
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Explanation: