Kline Construction is an all-equity firm that has projected perpetual EBIT of $292,000. The current cost of equity is 11.6 percent and the tax rate is 23 percent. The company is in the process of issuing $908,000 worth of perpetual bonds with an annual coupon rate of 5.8 percent at par. What is the value of the levered firm?

Kline Construction is an all-equity firm that has projected perpetual EBIT of $292,000. The current cost of equity is 11.6 percent and the tax rate is 23 percent. The company is in the process of issuing $908,000 worth of perpetual bonds with an annual coupon rate of 5.8 percent at par. What is the value of the levered firm?

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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