Calvert Corporation expects an EBIT of $23,500 every year
forever. The company currently has no debt, and its cost of equity
is 15.5 percent. The company can borrow at 1 percent and the
corporate tax rate is 40.
a. What is the current value of the company?
(Do not round intermediate calculations and round your
answer to 2 decimal places, e.g., 32.16.)
Value of the firm
$
90967.74
b. What will the value of the firm be if the
company takes on debt equal to 50 percent of its unlevered value?
(Do not round intermediate calculations and round your
answer to 2 decimal places, e.g., 32.16.)
Value of the firm
$
109161.29
What will the value of the firm be if the company takes on debt
equal to 100 percent of its unlevered value? (Do not round
intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
Value of the firm
$
127354.84
c. What will the value of the firm be if the
company takes on debt equal to 50 percent of its levered value?
(Do not round intermediate calculations and round your
answer to 2 decimal places, e.g., 32.16.)
Value of the firm
$
What will the value of the firm be if the company takes on debt
equal to 100 percent of its levered value? (Do not round
intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
Value of the firm
$
Calvert Corporation expects an EBIT of $23,500 every year forever. The company currently has no debt,...
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