Chapter 16, Problem 17QP

a)

Summary Introduction

To calculate: The present value of the company.

Introduction:

A firm’s value is a measure of economy reflecting the market value of the business.

Answer:

The value of the firm is $101,833.33.

b)

Summary Introduction

To calculate: The value of the firm if a firm takes debt at 50% and if it takes 100% of its unlevered value.

Introduction:

A firm’s value is a measure of economy reflecting the market value of the business.

Answer:

The value of the levered firm at 50% and 100% debt of its unlevered value is $119,654.17 and $137,457.00.

c)

Summary Introduction

To calculate: The value of the firm if the firm takes debt at 50% and 100% of its levered value.

Introduction:

A firm’s value is a measure of economy reflecting the market value of the business.

Answer:

The value of the levered firm at 50% and 100% debt of its levered value is $123,434.34 and $156,666.67.