In: Finance
A company has an un-leveraged value of 1,000,000 and debt 500,000. If the company is subject to a corporate tax rate of 0.35, and investors in the company are subject to a tax rate of 0.05 on equity income and 0.10 on debt income, what is the company's value?
Based on Miller Modigliani proposition with taxes
By formula,
Hence, value of firm is $1,156,944.44