What is the unlevered value of the firm

Reference no: EM13263464

A company is an all-equity firm that has projected earnings before interest and taxes (EBIT) of $500,000 forever. The current cost of equity is 10% and the tax rate is 30%. The company is in the process of issuing $2 million of bonds at par that carry a 5% annual coupon. What is the unlevered value of the firm (in millions)? (Note: You should use MM capital structure model with corporate taxes, but without personal taxes and bankruptcy costs.)

$3.50 million
$2.80million
$5.00 million
$6.50 million

Reference no: EM13263464

Questions Cloud

Calculate the copy department costs allocated to sales : Assuming the following copies were made during the year, 2,877,500 for sales and 2,735,000 for administration, calculate the copy department costs allocated to sales.

Determine the required-size thw copper conductor : Determine the required-size THW copper conductor and overcurrent device rating required for a dedicated feeder supplying a 250 A noncontinuous linear load. Assume an ambient temperature of 30°C

How many complete damped oscillations will have occurred : An LC circuit consists of a capacitor, C = 3.16 ?F, and an inductor, L = 5.80 mH. The capacitor is fully charged using a battery and then connected to the inductor. An oscilloscope is used to measure the frequency of the oscillations in the circui..

What is the average force experienced by the clay : A 0.24 kg blob of clay is thrown at a wall with an initial velocity of 23 m/s. what is the average force experienced by the clay

What is the unlevered value of the firm : The company is in the process of issuing $2 million of bonds at par that carry a 5% annual coupon. What is the unlevered value of the firm (in millions)? (Note: You should use MM capital structure model with corporate taxes, but without personal t..

What is diddys cost of equity : Diddy's corp stock has a beta of 1.0 the current risk free rate of 5% and expected return of markt is 15.5%. What is Diddy's cost of equity?

Compute the length of the pipe : An organ pipe is open at both ends. It is producing sound at its fifth harmonic, What is the length of the pipe

What wil the flotation-adjusted cost of equity be : Tan Lotion faces a flotation cost of 12% new equity issues. What wil the flotation-adjusted cost of equity be?

What net work would be required to bring it to a stop : A 1100kg automobile travels at 80km/h. What net work would be required to bring it to a stop

User Account

All Pages