Your Company has a perpetual EBITDA equal to USD 2,500,000 a year. Given your planned capex activity, you expect to depreciate your assets by USD 1,400,000 per year perpetually. The company’s debt-to-equity ratio is equal to 1.71, your debt is equal USD 27,000,000 and you expect the company to keep it at this amount perpetually. The pre-tax wacc of the company is equal to 7.98% and its debt has an expected return equal to 3.45%. Assume that the depreciation tax shield is as risky as the company’s debt and that the corporate tax rate is 40%.
a) What is the company’s unlevered value?
b) Assuming that there are 1,000,000 shares outstanding what is the share price?
