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Bruce & Co. expects its EBIT to be $100,000 every year forever. The firm can borrow at 11 percent. Bruce currently has no debt, and its cost of equity is 18 percent. The tax rate is 31 percent. Given the above information Complete the table given below for varying levels of debt below by using a mix of the given information and using your own computations. EBIT $100,000 11% Cost of debt Cost of equity when unlevered 18% Tax rate 31% Debt $0 $10,000 $10,000 $30,000 Cost of equity when levered Equity I D/E Vu VL WACC (Ctrl) -

Bruce & Co. expects its EBIT to be $100,000 every year forever. The firm can borrow at 11 percent. Bruce currently has no debt, and its cost of equity is 18 percent. The tax rate is 31 percent. Given the above information Complete the table given below for varying levels of debt below by using a mix of the given information and using your own computations. EBIT $100,000 11% Cost of debt Cost of equity when unlevered 18% Tax rate 31% Debt $0 $10,000 $10,000 $30,000 Cost of equity when levered Equity I D/E Vu VL WACC (Ctrl) -

Essentials Of Investments
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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Bruce & Co. expects its EBIT to be $100,000 every year forever. The firm can borrow at 11 percent. Bruce currently has no debt, and its cost of equity is 18 percent. The tax rate is 31 percent. Given the above information Complete the table given below for varying levels of debt below by using a mix of the given information and using your own computations. EBIT $100,000 11% Cost of debt Cost of equity when unlevered 18% Tax rate 31% Debt $0 $10,000 $10,000 $30,000 Cost of equity when levered Equity I D/E Vu VL WACC (Ctrl) -
Transcribed Image Text:Bruce & Co. expects its EBIT to be $100,000 every year forever. The firm can borrow at 11 percent. Bruce currently has no debt, and its cost of equity is 18 percent. The tax rate is 31 percent. Given the above information Complete the table given below for varying levels of debt below by using a mix of the given information and using your own computations. EBIT $100,000 11% Cost of debt Cost of equity when unlevered 18% Tax rate 31% Debt $0 $10,000 $10,000 $30,000 Cost of equity when levered Equity I D/E Vu VL WACC (Ctrl) -
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