А В C Unlevered Firm Levered Firm 10,000 3,200 6,800 2,312 4,488 3,200 1 2 EBIT 10,000 3 Interest 4 Taxable Income 10,000 3,400 6,600 5 Tax (tax rate: 34%) 6 Net Income 7 CFFA 0

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
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What is the cost of equity for the unleverd and levered firms?

Given:

Tax shield = 1,007.41

Size of debt = 40,000

Value of unlevered firm = 82,500

Value of levered firm = 96,100

Equity value of unlevered firm = 82,500

Equity value of levered firm = 56,100

 

А
В
C
Unlevered Firm Levered Firm
10,000
3,200
6,800
2,312
4,488
3,200
1
2 EBIT
10,000
3 Interest
4 Taxable Income
10,000
3,400
6,600
5 Tax (tax rate: 34%)
6 Net Income
7 CFFA
0
Transcribed Image Text:А В C Unlevered Firm Levered Firm 10,000 3,200 6,800 2,312 4,488 3,200 1 2 EBIT 10,000 3 Interest 4 Taxable Income 10,000 3,400 6,600 5 Tax (tax rate: 34%) 6 Net Income 7 CFFA 0
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