What is the current value of the company-value of the firm

Assignment Help Financial Management
Reference no: EM131343213

Jet Corporation expects an EBIT of $26,550 every year forever. The company currently has no debt, and its cost of equity is 14 percent. The corporate tax rate is 35 percent.

a. What is the current value of the company? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Current value $ 123,267.86

b-1 Suppose the company can borrow at 11 percent. What will the value of the firm be if the company takes on debt equal to 60 percent of its unlevered value? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Value of the firm $ 149154.11

b-2 Suppose the company can borrow at 11 percent. What will the value of the firm be if the company takes on debt equal to 100 percent of its unlevered value? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Value of the firm $ 166411.61

c-1 What will the value of the firm be if the company takes on debt equal to 60 percent of its levered value? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Value of the firm $_______

c-2 What will the value of the firm be if the company takes on debt equal to 100 percent of its levered value? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Value of the firm $________

Reference no: EM131343213

Questions Cloud

How can technology be used to enhance the community : Most technology can be seen to impact the professional policing model in a positive way. How can technology be used to enhance the community-based policing model
Lean six sigma for the twenty-first century : Read this article about Lean Six Sigma for the twenty-first century - Review the "What needs to change in Lean Six Sigma" column in Tables 1 through 5.
Lease valuation using formulas : Lease valuation using formulas. BigCo is considering leasing equipment that requires for $155,000 a year, payable in advance. The cost of the equipment is $900,000, has a CCA rate of 25% and will last for 6 years. What is the maximum lease payment th..
Why the issue is important to a business audience : An analysis of why the issue is important to a business audience that includes at least one source appropriate to the audience and concludes with at least one specific action the audience might take
What is the current value of the company-value of the firm : Jet Corporation expects an EBIT of $26,550 every year forever. The company currently has no debt, and its cost of equity is 14 percent. The corporate tax rate is 35 percent. What is the current value of the company? What will the value of the firm be..
Explain why firm might prefer stock repurchase : Explain why a firm might prefer a stock repurchase... Bookmark Explain why a firm might prefer a stock repurchase rather than an increase in the firm's regular dividend.
What is the impact of globalization on hrm : What is the impact of globalization on HRM in multinational organizations? Strategy: firstly, briefly summarize the impact of globalization on the multinational organisation's overall business strategy and then its overall HR strategy
When it comes to saving for retirement : Abagail Nelson a 25-year old personal loan officer at First National Bank, understands the importance of starting early when it comes to saving for retirement. She has committed $3,000 per year for her retirement fund and assumes that she'll retire a..
What is cost of equity after recapitalization : Meyer & Co. expects its EBIT to be $91,000 every year forever. The firm can borrow at 4 percent. Meyer currently has no debt, and its cost of equity is 9 percent and the tax rate is 35 percent. The company borrows $136,000 and uses the proceeds to re..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Write down the equations for simulating the path

Write down the equations for simulating the path followed by the asset price in the stochastic volatility model in equations.

  Considering a project that will generate perpetual cash flow

A firm is considering a project that will generate perpetual cash flows of $50,000 per year beginning next year. The project has the same risk as the firm's overall operations. If the firm's WACC is 12%, and its debt-to-equity ratio is 1.33, what is ..

  Cost of equity and leverage for the all equity situation

XYZ Ltd is currently all equity financed with a market value of $1 million. Its management is considering the issue of bonds with a face value of $500,000 (issued at face value). The new funds raised will be used to repurchase shares from existing sh..

  Computing the weighted average cost of capital

"Lowe's has 100,000 shares of common stock outstanding at a market price of $40 a share. There are 10,000 shares of 8 percent preferred stock outstanding at a market price of $30 a share. The firm has 1000 bonds outstanding with a face value of $1,00..

  Point-of-time related values and period-related values

What is the difference between point-of-time related values and period-related values and what do they have in common? Give Practical examples for each.

  What was the real return on bonds

Over the past year, Getty Markets bonds, which have a 5 percent semiannual coupon, had a return of 7.47 percent. The rate of inflation was 4.1 percent over the year. What was the real return on these bonds?

  Straight-line basis toward a zero salvage value

Roten Manufacturing Company is considering an investment on a machine for producing auto parts. The machine costs $250,000 today, will have a five-year life and will be depreciated over a five-year life on a straight-line basis toward a zero salvage ..

  An inverted yield curve slopes

An inverted yield curve slopes

  Additional educational years or the time value of money

You have chosen biology as your college major because you would like to be a medical doctor. However, you find that the probability of being accepted into medical school is about 10 percent. Without considering the additional educational years or the..

  Real retirement spending to remain approximately equal

What annual withdrawal will allow real retirement spending to remain approximately equal, assuming savings of $1,000,000 invested at 8%, a 25-year horizon, and 4% expected inflation?

  Increase in the value of the dollar

Which of the following situations would likely lead to an increase in the value of the U.S. dollar? OPEC votes to change crude oil price denomination from USD to the euro. The U.S. is spending billions of dollars to lead the international campaign ag..

  Can a us firm benefit from investing funds in singapore

Does interest rate parity exist? Can a US firm benefit from investing funds in Singapore using covered interest arbitrage?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd