Change Corporation expects an EBIT of $31,200 every year forever. The company currently has no debt,...

Change Corporation expects an EBIT of $31,200 every year forever. The company currently has no debt, and its cost of equity is 11 percent. a. What is the current value of the company? b. Supposed the company can borrow at 6 percent. If the corporate tax rate is 22 percent, what will the value of the firm be if the company takes on debt equal to 50 percent of its unlevered value? What if it takes on debt equal to 100 percent of its unlevered value? c. What will the value of the firm be if the company takes on debt equal to 50 percent of its levered value? What if the company takes on debt equal to 100 percent of its levered value?

Expert Solution

jeff jeffy answered 6 months ago

Change Corporation expects an EBIT of $53,000 every year forever. The company currently has no debt,...

Change Corporation expects an EBIT of $53,000 every year forever. The company currently has no debt, and its cost of equity is 15 percent. The corporate tax rate is 21 percent. a. What is the current value of the company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-1. Suppose the company can borrow at 12 percent. What will the value of the firm be if the company takes on debt equal to...

Change Corporation expects an EBIT of $45,000 every year forever. The company currently has no debt,...

Change Corporation expects an EBIT of $45,000 every year forever. The company currently has no debt, and its cost of equity is 13 percent. The corporate tax rate is 23 percent. a. What is the current value of the company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-1. Suppose the company can borrow at 9 percent. What will the value of the firm be if the company takes on debt equal...

Change Corporation expects an EBIT of $55,000 every year forever. The company currently has no debt,...

Change Corporation expects an EBIT of $55,000 every year forever. The company currently has no debt, and its cost of equity is 14 percent. The corporate tax rate is 22 percent. a. What is the current value of the company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-1. Suppose the company can borrow at 9 percent. What will the value of the firm be if the company takes on debt equal...

Change Corporation expects an EBIT of $39,000 every year forever. The company currently has no debt,...

Change Corporation expects an EBIT of $39,000 every year forever. The company currently has no debt, and its cost of equity is 14 percent. The corporate tax rate is 24 percent. a. What is the current value of the company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-1. Suppose the company can borrow at 10 percent. What will the value of the firm be if the company takes on debt equal...

Hunter Corporation expects an EBIT of $29,000 every year forever. The company currently has no debt...

Hunter Corporation expects an EBIT of $29,000 every year forever. The company currently has no debt and its cost of equity is 14 percent. The corporate tax rate is 24 percent. a. What is the current value of the company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-1. Suppose the company can borrow at 8 percent. What will the value of the company be if takes on debt equal to 30...

Calvert Corporation expects an EBIT of $21,250 every year forever. The company currently has no debt,...

Calvert Corporation expects an EBIT of $21,250 every year forever. The company currently has no debt, and its cost of equity is 14.0 percent. The company can borrow at 8 percent and the corporate tax rate is 40. a. What is the current value of the company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value of the firm $ b. What will the value of the firm be if the company takes...

Hunter Corporation expects an EBIT of $45,000 every year forever. The company currently has no debt...

Hunter Corporation expects an EBIT of $45,000 every year forever. The company currently has no debt and its cost of equity is 13 percent. The corporate tax rate is 23 percent. A .Suppose the company can borrow at 9 percent. What will the value of the company be if takes on debt equal to 40 percent of its unlevered value? B.Suppose the company can borrow at 9 percent. What will the value of the company be if takes on debt...

Hunter Corporation expects an EBIT of $43,000 every year forever. The company currently has no debt...

Hunter Corporation expects an EBIT of $43,000 every year forever. The company currently has no debt and its cost of equity is 11 percent. The corporate tax rate is 21 percent. a. What is the current value of the company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-1. Suppose the company can borrow at 8 percent. What will the value of the company be if takes on debt equal to 30...

Cavo Corporation expects an EBIT of $22,500 every year forever. The company currently has no debt,...

Cavo Corporation expects an EBIT of $22,500 every year forever. The company currently has no debt, and its cost of equity is 12 percent. The corporate tax rate is 35 percent. a. What is the current value of the company? (Round your answer to 2 decimal places. (e.g., 32.16)) Current value $ b-1 Suppose the company can borrow at 7 percent. What will the value of the firm be if the company takes on debt equal to...

Hunter Corporation expects an EBIT of $27,000 every year forever. The company currently has no debt...

Hunter Corporation expects an EBIT of $27,000 every year forever. The company currently has no debt and its cost of equity is 13 percent. The corporate tax rate is 23 percent. a. What is the current value of the company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-1. Suppose the company can borrow at 7 percent. What will the value of the company be if takes on debt equal to 60 percent...

Question