What is the value of the firm

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Meyer & Co. expects its EBIT to be $66,000 every year forever. The firm can borrow at 8 percent. Meyer currently has no debt, and its cost of equity is 14 percent.

If the tax rate is 35 percent, what is the value of the firm? Note: Use the M&M proposition I formula with taxes but without any debt. (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

What will the value be if the company borrows $140,000 and uses the proceeds to repurchase shares? Note: Use the M&M proposition I formula with taxes and with debt. (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Reference no: EM131041974

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