What is the value of firm-uses proceeds to repurchase shares

Assignment Help Financial Management

Reference no: EM13915208

Bruce & Co. expects its EBIT to be $80,000 every year forever. The firm can borrow at 4 percent. Bruce currently has no debt, and its cost of equity is 10 percent.

a. If the tax rate is 35 percent, what is the value of the firm?

b. What will the value be if Bruce borrows $122,000 and uses the proceeds to repurchase shares?

Reference no: EM13915208

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