A firm has an net operating profit of P300,000, interest of P35,000, and a tax rate of 25%. The firm has an before-tax cost of debt of 6% and a cost of equity of 15 percent. The firm's target capital structure is set at a mix of 35% debt and 65% equity. According to the traditional approach to capital structure, the value of the firm is? A. 1,677,215 B. 2,700,000 C. 2,531,646 D. 2,649,007
A firm has an net operating profit of P300,000, interest of P35,000, and a tax rate of 25%. The firm has an before-tax cost of debt of 6% and a cost of equity of 15 percent. The firm's target capital structure is set at a mix of 35% debt and 65% equity. According to the traditional approach to capital structure, the value of the firm is? A. 1,677,215 B. 2,700,000 C. 2,531,646 D. 2,649,007
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A firm has an net operating profit of P300,000, interest of P35,000, and a tax rate of 25%. The firm has an before-tax cost of debt of 6% and a
A. 1,677,215
B. 2,700,000
C. 2,531,646
D. 2,649,007
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