Lazare Corporation expects an EBIT of $30,800 every year forever. Lazare currently has no debt, and its cost of equity is 14%. The firm can borrow at 9%. (Do not round internmediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.) a. If the corporate tax rate is 35%, what is the value of the firm? Value of the firm b. What will the value be if the company converts to 50% debt? Value of the firm c. What will the value be if the company converts to 100% debt? Value of the firm

Lazare Corporation expects an EBIT of $30,800 every year forever. Lazare currently has no debt, and its cost of equity is 14%. The firm can borrow at 9%. (Do not round internmediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.) a. If the corporate tax rate is 35%, what is the value of the firm? Value of the firm b. What will the value be if the company converts to 50% debt? Value of the firm c. What will the value be if the company converts to 100% debt? Value of the firm

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Stevenson's Bakery is an all-equity company that has projected perpetual earnings before interest and taxes of $43,700 a year. The cost of equity is 15.2 percent, and the tax rate is 22 percent. The company can borrow money at 7.15 percent. If the company borrows $50,000, what will be its levered value? Multiple Choice O O O O $229,507 $187,613 $203,682 $189,919 $235,250
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XYZ is considering altering its capital structure. Currently it has 40% debt and 60% equity. XYZ's levered beta is 2.0 under its current capital structure. The firm's tax rate is 40% which will not change if the capital structure is altered. What is the value of the levered beta if XYZ changes its capital structure to 50% debt, 50% equity? show your answer to 1 decimal place (example: a beta of 1.2)
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Given that the firm has a value of $1,196,428.57 when it is all equity, what will be the value of the firm if Ice Cream Sandwich Co. borrows $160,000 of permanent debt and uses the proceeds to buy back stock? Enter your answer rounded to two decimal places.
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8. Please help me to answer this completely. Thank you.