Taxes should the company change its debt-equity ratio

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Reference no: EM131064586

MM Tool Manufacturing has an expected EBIT of $67,000 in perpetuity and a tax rate of 35 percent. The firm has $130,000 in outstanding debt at an interest rate of 8 percent, and its unlevered cost of capital is 15 percent. What is the value of the company according to MM Proposition I with taxes Should the company change its debt-equity ratio if the goal is to maximize the value of the company Explain.

Reference no: EM131064586

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Taxes should the company change its debt-equity ratio : MM Tool Manufacturing has an expected EBIT of $67,000 in perpetuity and a tax rate of 35 percent. The firm has $130,000 in outstanding debt at an interest rate of 8 percent, and its unlevered cost of capital is 15 percent. What is the value of the co..

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