7. Given the following information for two companies, both of which have a 30% tax rate and a 100% payout ratio: ($ in m

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answerhappygod
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7. Given the following information for two companies, both of which have a 30% tax rate and a 100% payout ratio: ($ in m

Post by answerhappygod »

7. Given the following information for two companies, both ofwhich have a 30% tax rate and a 100% payout ratio:
($ in millions)
Company A
Company B
EBIT
$100
$100
Interest Expense
$20
$0
Total Assets
$1,000
$1,000
Calculate the following for eachcompany:
Assuming the risk associated with thedebt is small, which company do you think is more valuable andwhy?
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