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Calculate the value of the levered firm based on: Assuming that there is an unlevered firm and a levered firm. The basic information is given by the following table.   Table 1: Information of the firms   Unlevered firm Levered firm EBIT 10,000 10,000 Interest 0 3,200 Taxable income 10,000 6,800 Tax (tax rate: 34%) 3,400 2,312 Net income 6,600 4,488 CFFA 0 -3,200   Assuming that cost of debt =8%; unlevered cost of capital =10%; systematic risk of the asset is 1.5

Calculate the value of the levered firm based on: Assuming that there is an unlevered firm and a levered firm. The basic information is given by the following table.   Table 1: Information of the firms   Unlevered firm Levered firm EBIT 10,000 10,000 Interest 0 3,200 Taxable income 10,000 6,800 Tax (tax rate: 34%) 3,400 2,312 Net income 6,600 4,488 CFFA 0 -3,200   Assuming that cost of debt =8%; unlevered cost of capital =10%; systematic risk of the asset is 1.5

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
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Calculate the value of the levered firm based on:

Assuming that there is an unlevered firm and a levered firm. The basic information is given by the following table.

 

Table 1: Information of the firms

 

Unlevered firm

Levered firm

EBIT

10,000

10,000

Interest

0

3,200

Taxable income

10,000

6,800

Tax (tax rate: 34%)

3,400

2,312

Net income

6,600

4,488

CFFA

0

-3,200

 

Assuming that cost of debt =8%; unlevered cost of capital =10%; systematic risk of the asset is 1.5

 

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