The goal is to maximize the value of the firm

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Reference no: EM131500465

M&M Bruin Manufacturing has an expected EBIT of $26,000 in perpetuity, a tax rate of 35 percent, and a debt-equity ratio of .60. The firm has $60,000 in outstanding debt at an interest rate of 8 percent, and its WACC is 12 percent.

What is the value of the firm according to M&M Proposition I with taxes?

Should Bruin change its debt-equity ratio if the goal is to maximize the value of the firm? Explain.

Reference no: EM131500465

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