About the value of the firm

Assignment Help Financial Management

Reference no: EM131343206

Tool Manufacturing has an expected EBIT of $95,000 in perpetuity and a tax rate of 35 percent. The firm has $155,000 in outstanding debt at an interest rate of 8.9 percent, and its unlevered cost of capital is 15 percent.

What is the value of the firm according to M&M Proposition I with taxes? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

Value of the firm $_____

Reference no: EM131343206

Questions Cloud

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..

What is the company unlevered cost of equity capital : Twice Shy Industries has a debt−equity ratio of 1.8. Its WACC is 9.1 percent, and its cost of debt is 7.1 percent. The corporate tax rate is 35 percent. What is the company’s cost of equity capital? What is the company’s unlevered cost of equity capi..

About the expected return : Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Recession .30 − .13 Boom .70 .25 Calculate the expected return.

About the value of the firm : Tool Manufacturing has an expected EBIT of $95,000 in perpetuity and a tax rate of 35 percent. The firm has $155,000 in outstanding debt at an interest rate of 8.9 percent, and its unlevered cost of capital is 15 percent. What is the value of the fir..

Wants to increase its credit standards : Pa Bell, Inc., wants to increase its credit standards. They expect sales will fall by $50,000 and bad-debt expense will fall by 10 percent of this amount. The firm has a 15 percent profit margin on its sales. The cost of financing current assets is e..

Economy probability of state of economy rate of return : Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Recession .30 − .13 Boom .70 .25 Calculate the expected return.

Considering an investment in project-financial intermediary : Nob-Orrow Inc. is considering an investment in a project that is similar in risk to its existing projects. The firm makes no use of debt and is entirely financed by common stock with a beta of 1.4. The expected return on the market portfolio is 10 pe..

Default free rate and market rate of return : The EBIT, Depreciation, and tax rate of a firm are $20 million, $2 million and 35% respectively. Its sales rise $5, and its inventory ratio to sales is 40%, while its accounts receivable to sales is 45%, and its accounts payable to sales is 35%. We a..

User Account

All Pages