A company just issued $453000 of perpetual 5% debt and used the proceeds to repurchase stock. The company expects to generate 107000 of EBIT in perpetuity. The company distributes all its earnings as dividends at the end of each year. The firm's unlevered cost of capital is 14% and the tax rate is 25%. Use APV method to calculate the value of the company with leverage. Your Answer:

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Q: Bhupatbhai

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A:

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A: Leverage refers to the strategy to use the borrowed amount for increasing the return of an…

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Q: Janetta, Corp. has an EBIT of $1,015,000 per year that is expected to continue in perpetuity. The…

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