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What is the value of company now

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MM-Proposition I-Firm's value: The Buffalo Studio is currently an all-equity firms that has 10,000 shares of stock outstanding with a market price of $15 per share. The current (unlevered) cost of capital of 14 percent and a tax rate of 34 percent. The company is considering issue $2,700 of debt that carries a 7 percent coupon. The debt is selling at par value.

(1) What is the value of this company now?

(2) What is the value of this company when it issues debt?

Reference no: EM132516228

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