Stevensons bakeries and all equity firm that has a projected perpetual EBIT of $144,000 per year. The cost of equity is 10.5% and the tax rate is 21%. Assume there's no depreciation, no capital spending and no change in networking capital. The firm can borrow perpetual debt at 5.8%. Currently, the firm is considering converting to a debt equity ratio of .54. What is the firms levered value? MM assumptions hold.
Stevensons bakeries and all equity firm that has a projected perpetual EBIT of $144,000 per year. The cost of equity is 10.5% and the tax rate is 21%. Assume there's no depreciation, no capital spending and no change in networking capital. The firm can borrow perpetual debt at 5.8%. Currently, the firm is considering converting to a debt equity ratio of .54. What is the firms levered value? MM assumptions hold.
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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Stevensons bakeries and all equity firm that has a projected perpetual EBIT of $144,000 per year. The
Transcribed Image Text:012323
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s
MC algo 16-24 Firm Value
Stevenson's Bakery is an all-equity firm that has projected perpetual EBIT of $144,000 per year. The cost of equity is 10.5 percent and the tax rate is 21 percent
Assume there is no depreciation, no capital spending and no change in net working capital. The firm can borrow perpetual debt at 5.8 percent Currently, the firm is
considering converting to a debt-equity ratio of 54. What is the firm's levered value? MM assumptions hold.
Multiple Choice
O
O
$802 206
$1,077.818
$946.130
$1163.200
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