Baker Corporation expects an EBIT of $31,000+($200x3) every year forever. The company currently has no debt and its cost
Posted: Mon Nov 15, 2021 5:02 pm
Baker Corporation expects an EBIT of $31,000+($200x3) every year
forever. The company currently has no debt and its cost of equity
is 14%. The corporate tax rate is 29%.
a. What is the current value of the company?
b. Suppose the company can borrow at 7%. What will the value of
the company be if it takes on debt equal to 30 percent of its
unlevered value?
c. What will the value of the company be if it takes on debt
equal to 30 percent of its levered value?
forever. The company currently has no debt and its cost of equity
is 14%. The corporate tax rate is 29%.
a. What is the current value of the company?
b. Suppose the company can borrow at 7%. What will the value of
the company be if it takes on debt equal to 30 percent of its
unlevered value?
c. What will the value of the company be if it takes on debt
equal to 30 percent of its levered value?