Uses the proceeds to repurchase shares

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Reference no: EM131333753

Bruce & Co. expects its EBIT to be $49,000 every year forever. The company can borrow at 8 percent. The company currently has no debt, and its cost of equity is 11 percent.

If the tax rate is 35 percent, what is the value of the company?

What will the value be if the company borrows $142,000 and uses the proceeds to repurchase shares?

Reference no: EM131333753

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