Uses the proceeds to repurchase shares

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Reference no: EM131445756

1) Meyer & Co. expects its EBIT to be $87,000 every year forever. The firm can borrow at 12 percent. Meyer currently has no debt, and its cost of equity is 16 percent. If the tax rate is 35 percent,

a. What is the value of the firm? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

b. What will the value be if the company borrows $160,000 and uses the proceeds to repurchase shares? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Reference no: EM131445756

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