Letang Corporation expects an EBIT of $23,750 every year forever. The company currently has no debt, and its cost of equity is 16 percent. The company can borrow at 9.5 percent and the corporate tax rate is 35. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Requirement 1: What is the current value of the company?
Requirement 2: (a) What will the value of the firm be if the company takes on debt equal to 60 percent of its unlevered value?
(b) What will the value of the firm be if the company takes on debt equal to 100 percent of its unlevered value
Requirement 3: (a) What will the value of the firm be if the company takes on debt equal to 60 percent of its levered value?
b) What will the value of the firm be if the company takes on debt equal to 100 percent of its levered value?
Letang Corporation expects an EBIT of $23,750 every year forever. The company currently has no debt, and its cost of equity is 16 percent. The company can borrow at 9.5 percent and the corporate tax rate is 35. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Requirement 1: What is the current value of the company?
| Requirement 2: | |||
| (a) What will the value of the firm be if the company takes on debt equal to 60 percent of its unlevered value?
|
Related questions
| Letang Corporation expects an EBIT of $20,000 every year forever. The company currently has no debt, and its cost of equity is 14.5 percent. The company can borrow at 9 percent and the corporate tax rate is 35. |
| Requirement 1: |
| What is the current value of the company? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| Value of the firm | $ |
| Requirement 2: |
| (a) What will the value of the firm be if the company takes on debt equal to 60 percent of its unlevered value? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| Value of the firm | $ |
| (b) What will the value of the firm be if the company takes on debt equal to 100 percent of its unlevered value? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| Value of the firm | $ |
| Requirement 3: |
| (a) What will the value of the firm be if the company takes on debt equal to 60 percent of its levered value? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| Value of the firm | $ |
| (b) What will the value of the firm be if the company takes on debt equal to 100 percent of its levered value?(Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| Value of the firm | $ |
| Jet Corporation expects an EBIT of $26,500 every year forever. The company currently has no debt, and its cost of equity is 15 percent. The corporate tax rate is 35 percent. What is the current value of the company? Suppose the company can borrow at 10 percent. What will the value of the firm be if the company takes on debt equal to 40 percent of its unlevered value? Suppose the company can borrow at 10 percent. What will the value of the firm be if the company takes on debt equal to 100 percent of its unlevered value? What will the value of the firm be if the company takes on debt equal to 40 percent of its levered value? What will the value of the firm be if the company takes on debt equal to 100 percent of its levered value? |
