Luminous Tech Inc. is an all-equity financed firm with an EBIT of $30,000. The firm's corporate tax rate is 28%, and its discount rate is 9%. Assume EBIT remains constant indefinitely. What is the market value of the firm?

Luminous Tech Inc. is an all-equity financed firm with an EBIT of $30,000. The firm's corporate tax rate is 28%, and its discount rate is 9%. Assume EBIT remains constant indefinitely. What is the market value of the firm?

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 1P: Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1...

See similar textbooks

Related questions

Q: Prepare the journal entry on the books of Telex Systems, Inc. on:⮚ Dec 10⮚ Dec 31 to adjust…

A: Step 1: Step 2: Step 3: Step 4:

Q: General accounting question

A: Step 1: Calculate total sales.= selling price per chair x chairs to be sold= $130 x 5,000 chairs=…

Q: I need some help with problem B. I have done the work, but I'd like to make sure if I have done the…

A: Step 1: Calculation of Fair Value Adjustments and Gain on Acquisition :- Determine Fair Value of…

Q: Aspire Enterprises produces two products, GR and HT, from a joint production process. Product IF has…

A: Explanation of Joint Costs:Joint costs are the total costs incurred in a manufacturing process that…

Q: Solution

A: We have given, Direct material cost = $4,200Direct labor hours = 95Direct labor wage per hour = $20…

Q: Need answer

A: Understanding the relationship:Return on Assets (ROA) = Net Profit Margin × Total Asset…

Q: Need help with this question solution general accounting

A: Step 1: Definition of Indirect Manufacturing CostIndirect manufacturing costs include variable…

Q: financial account

A: Step 1: Definition of Gross Profit Margin (GPM%) and Markup on Cost PercentageMark-up is the cost…

Q: During May, Schultz Company produced 12,000 units of a product called Premium. Premium has a…

A: Concept of Materials Price Variance: Materials Price Variance is the difference between the actual…

Q: compute overhead cost per unit for of the two product using activity-based costing and round…

A: Step 1:1. The activity rate is calculated as follows: Formula table: Result of the above formula…

Q: Dana intends to invest $32,000 in either a Treasury bond or a corporate bond. The Treasury bond…

A: solve this step by step.For part a-2 (Corporate bond with 24% tax rate)Initial investment…

Q: expert of general account answer

A: Step 1: Definition of Degree of Operating Leverage (DOL)The degree of operating leverage (DOL) is a…

Q: Financial accounting

A: Step 1: Define Net IncomeNet Income is the total earnings of a company after deducting all expenses,…

Q: help me to solve this questions

A: Step 1: Definition of Gross Profit MarginGross Profit Margin is a financial ratio that measures how…

Q: Please solve this problem general Accounting

A: Step 1: Define Gross ProfitGross Profit is the difference between the selling price of a product and…

Q: The Palmer School of Business operates a transportation service, solely for the purpose of providing…

A: 1. Another nameAnother name can be regression line or trend line.Purpose = This line shows the…

Q: help me to solve this answer

A: To calculate the Return on Equity (ROE) for Everest Corp., we use the formula: Understanding the…

Q: Need Help

A: Concept of Variable OverheadVariable overhead refers to the indirect manufacturing costs that…

Q: A german automotive manufacturing solve this accounting questions

A: Step 1: Definition of Gross MarginGross margin represents the portion of revenue remaining after…

Q: I want to correct answer general accounting question

A: Step 1: Definition of Equivalent Units of Production (FIFO Method)Equivalent units of production…

Q: Gross profit

A: Step 1: Definition of Gross Profit MarginGross Profit Margin is a financial metric that measures the…

Q: What is company B's net income for this financial accounting question?

A: Step 1: Define Net IncomeNet Income (also known as Net Profit or Earnings) is the total amount of…

Q: provide correct answer general account

A: Calculation of Average Accounts ReceivableAverage Accounts Receivable = (Accounts Receivable 2023 +…

Q: !??

A: Concept of Estimated Manufacturing Overhead: Estimated manufacturing overhead is the projected…

Q: Granger Corporation's High and low levels of activity

A: Concept of High-Low MethodThe High-Low Method is a cost estimation technique used to separate fixed…

Q: If you give me correct answer this general accounting question I will give you helpful rate

A: Step 1: Define Net IncomeNet Income is the total profit a company earns after deducting all expenses…

Q: Manufacturing overhead is?

A: Explanation of Manufacturing Overhead: Manufacturing overhead encompasses all manufacturing costs…

Q: Need help with this question solution general accounting

A: Step 1: Definition of Rate of Return on Investment (ROI)The Rate of Return on Investment (ROI)…

Q: none

A: Step 1: Definition of Net Operating Income (NOI)Net Operating Income (NOI) represents a company's…

Q: What was the return you received over the year on these financial accounting question?

A: Step 1: Definition of Total ReturnTotal return measures the overall gain or loss from an investment,…

Q: account

A: Percentage change in operating cash flows = Degree of operating leverage*Percentage change in units…

Q: Omega Corp. has a material standard of 1.8 pounds per unit of output. Each pound has a standard…

A: Formula for Direct Materials Quantity Variance:Direct Materials Quantity Variance = (Standard…

Q: provide correct answer

A: Components:Selling Price: Melody Tunes sells each CD for $15.50.Variable Costs:Production: $4.50 per…

Q: Not use ai solve this question do fast

A: Calculate the capital gain:Selling price per share: $52Purchase price per share: $47.50Capital gain…

Q: financial account

A: Step 1: Introduction to ratio analysisRatio analysis is a method used to analyze financial…

Q: None

A: Step 1: Definition of Rate of Return on Assets (ROA)The Rate of Return on Assets (ROA) measures a…

Q: Year

A: Ending Inventory is the value of goods remaining in stock at the end of an accounting period after…

Q: Do fast answer of this accounting questions

A: Step 1: Introduction to leasesA lease is defined as a contractual agreement incorporated between two…

Q: What is the amount of cash paid for wages?

A: Step 1: Introduction to budgetingBudgeting is defined as the process of preparing a financial plan…

Q: do fast answer of this account questions

A: Step 1: Definition of Cash CycleThe cash cycle represents the time taken by a company to convert…

Q: How many weeks of supply does summit logistics Inc. Hold ?

A: To calculate weeks of supply, use the formula: Weeks of Supply=Cost of Goods Sold…

Q: Need solution

A: Concept of AssetsAssets are the resources owned by a company that have economic value and can…

Q: What is the required rate of return on these financial accounting question?

A: Understanding the Problem We are given the following information about Evergreen Solutions:Dividend…

Q: Need answer

A: Explanation of Cost of Raw Materials Used:The cost of raw materials used represents the total value…

Q: a.Prepare the lease schedule for the Kaizen Limitedb. Prepare Kaizen’s journal entries for 2016…

A: Given Information:Lease Term: 5 yearsEconomic Life: 6 yearsAnnual Rental Payment: $160,000 (includes…

Q: Yejun works for New & Old Apparel, which pays employees on a semimonthly basis. Yejun's annual…

Q: The first-quarter tax return needs to be filed for Prevosti Farms and Sugarhouse by April 30, 2023.…

Q: Answer? ? Financial accounting question

A: Step 1: Determine the high and low cost and production. CostProductionHigh$5,3203,800Low$4,2502,500…

Q: General accounting

A: Step 1: Definition of Retained Earnings IncreaseRetained earnings represent the portion of net…

Q: I want to this question answer general Accounting

A: Step 1: Definition of Net IncomeNet income is the amount of profit a company earns after deducting…

Question

100%

What is the market value of the firm on these financial accounting question?

Luminous Tech Inc. is an all-equity financed firm with an EBIT of
$30,000. The firm's corporate tax rate is 28%, and its discount
rate is 9%. Assume EBIT remains constant indefinitely.
What is the market value of the firm?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

Suppose Tool Corp. is an unleveraged firm. It has an expected EBIT of 67,000 in Perpetuity and a tax rate of 35%. Its cost of equity is 10.25%. What is Tool Corp’s firm value? (SHOW YOUR WORK)
Vinay
Please provide a written out by hand solution for the above example.?
A firm has EBIT of $30 million. It has debt of $100 million and the cost of debt is 7%. Its unlevered cost of capital is 10% and tax rate at 35%. a) What’s its unlevered firm value? b) What’s its levered firm value? c) What’s its equity value?
Suppose you are estimating the WACC for Columbus Inc. It has the following data from its balance sheet: total debt = $200 million; total equity=$120 million. It has 20 million shares outstanding, and its stock is trading at $32 per share. Your analysis shows that the company's current borrowing rate is 7%, and that the cost of equity is 13%. If the company marginal tax rate is 30%, what is its WACC?
Rolex, Inc. has equity with a market value of $20 million and debt with a market value of $20 million. Assume the firm has no default risk and can borrow at the risk-free interest rate. The risk-free interest rate is 5 percent per year, and the expected return on the market portfolio is 11 percent. The beta of the company's equity is 1.2. The tax rate is 20%. What is the cost of capital for an otherwise identical all-equity firm? O 7.77% O 9.00% O 10.14% O 8.27%
A firm is firanced with market values of $295 million in nsk-free debt and $575 million in equity. The firm's asset beta is 0.93. Assume a risk-free rate of 2.5%, a market risk-premium of 6.2% and a tax rate of 25%. Assume the firm's debt beta is 0. What is the firms after- tax weighted average cost of capital? (answer to the fourth decimal place)
Suppose Alcatel-Lucent has an equity cost of capital of 10.4%, market capitalization of $11.52 billion, and an enterprise value of $16 billion. Suppose Alcatel-Lucent's debt cost of capital is 6.6% and its marginal tax rate is 34%. a. What is Alcatel-Lucent's WACC? b. If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown here, ? c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part (b)? a. What is Alcatel-Lucent's WACC? Alcatel-Lucent's WACC is 9.34 %. (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 1 FCF ($ million) 45 Print 0 - 100 Done 2 101 3 66 - X
Suppose Alcatel-Lucent has an equity cost of capital of 9.2%, market capitalization of $10.95 billion, and an enterprise value of $15 billion. Suppose Alcatel-Lucent's debt cost of capital is 6.9% and its marginal tax rate is 38%. a. What is Alcatel-Lucent's WACC? b. If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown here,? c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part (b)? a. What is Alcatel-Lucent's WACC? Alcatel-Lucent's WACC is%. (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 0 1 FCF ($ million) - 100 50 Print C Done 2 99 3 66 X
What are its after tax earnings? Accounting
What is the firm's ROE ???
Stevenson's Bakery is an all-equity firm that has projected perpetual EBIT of $183,000 per year. The cost of equity is 13.1 percent and the tax rate is 21 percent. The firm can borrow perpetual debt at 6.3 percent. Currently, the firm is considering converting to a debt–equity ratio of .93. What is the firm's levered value? MM assumptions hold. A. $829,786 B. $1,215,262 C. $1,155,579 D. $997,511 E. $921,985