An unlevered firm has a weighted average cost of capital of 15 percent. The current market...
An unlevered firm has a weighted average cost of capital of 15
percent. The current market value of the unlevered firm $250
million. Assuming a perfect capital market and according to M&M
Proposition I, what will be the value of the levered company if it
changes to a debt-equity ratio of 1?
A) $125
B) $168.75
C) $206.25
D) $250
E) $293.75
Homework Answers
D) $250
According to M&M proposition 1, when there are no taxes, the choice of equity and debt does not matter. Therefore, the value of the firm will be equal to unlevered firm.
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An unlevered firm has a weighted average cost of capital of 15
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An unlevered firm has a weighted average cost of capital of 14 percent. The current market value of the unlevered firm $250 million. Assuming a perfect capital market and according to M&M Proposition I, what will be the value of the levered company if it changes to a debt-equity ratio of 1? A) $125 B) $168.75 C) $206.25 D) $250 E) $293.75
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An unlevered firm has a weighted average cost of capital of (10+x) percent. The current market value of the unlevered firm $250 million. Assuming a perfect capital market and according to M&M Proposition I, what will be the value of the levered company if it changes to a debt-equity ratio of 1? let x=1 A) $125 B) $168.75 C) $206.25 D) $250 E) $293.75
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lets say my last 4 id numbers are 1122
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