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What is the value of the firm

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O'Connell & Co. expects its EBIT to be $74,000 every year forever. The firm can borrow at 7%, and has a tax rate of 35%. O'Connell currently has no debt, and its cost of equity is 13%.

a. What is the value of the firm?

b. What will the value be if the company borrows $125,000 and uses the proceeds to repurchase shares?

Reference no: EM132185251

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