Eccles Incorporated, a zero growth firm, has an expected EBIT of $100,000 and a corporate tax...
Eccles Incorporated, a zero growth firm, has an expected EBIT of $100,000 and a corporate tax rate of 25%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%.
Refer to the data for Eccles Incorporated.What is the firm's cost of equity according to MM with corporate taxes?
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Eccles Incorporated, a zero growth firm, has an expected EBIT of
$100,000 and a corporate tax...
MM Model with Corporate Taxes An unlevered firm has a value of $900 million. An otherwise...
MM Model with Corporate Taxes An unlevered firm has a value of $900 million. An otherwise identical but levered firm has $140 million in debt at a 5% interest rate. Its pre-tax cost of debt is 5% and its unlevered cost of equity is 10%. No growth is expected. Assuming the corporate tax rate is 35%, use the MM model with corporate taxes to determine the value of the levered firm. Enter your answers in millions. For example, an answer...
Gary Electronics has an EBIT of $200,000, zero growth and its tax rate is 40%. Gary...
Gary Electronics has an EBIT of $200,000, zero growth and its tax rate is 40%. Gary has $600,000 debt outstanding (8% before-tax cost of debt), and a similar company with no debt has a cost of equity of 10%. a) What is the unlevered firm value if Gary does not have debt? b) Using the compressed adjusted present value model, what is the value of Gary’s tax shield? c) Using the compressed adjusted present value model, what is Gary’s value...
Tool Manufacturing has an expected EBIT of $51,000 in perpetuity and a tax rate of 21...
Tool Manufacturing has an expected EBIT of $51,000 in perpetuity and a tax rate of 21 percent. The firm has $126,000 in outstanding debt at an interest rate of 5.35 percent, and its unlevered cost of capital is 9.6 percent. What is the value of the firm according to M&M Proposition I with taxes? Should the company change its debt-equity ratio if the goal is to maximize the value of the firm? Explain.
8. (Chapter 16) Company Z has perpetual annual EBIT equal to $70 million; a corporate tax...
8. (Chapter 16) Company Z has perpetual annual EBIT equal to $70 million; a corporate tax rate of 21 percent, outstanding debt with market value $100 million; cost of debt equal to 6 percent; and unlevered cost of capital equal to 15 percent. (Assume the world of MM with taxes.) a. What is the total value of the equity in this firm? b. What is the required return on the (levered) equity? c. What is the WACC?
Tool Manufacturing has an expected EBIT of $82,000 in perpetuity and a tax rate of 35...
Tool Manufacturing has an expected EBIT of $82,000 in perpetuity and a tax rate of 35 percent. The firm has $165,000 in outstanding debt at an interest rate of 8.5 percent, and its unlevered cost of capital is 15 percent. What is the value of the firm according to MM Proposition I with taxes? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value of the firm $
12-2) Digital Design (DD) has a beta of 0.75. The tax rate is 30% and DD...
12-2) Digital Design (DD) has a beta of 0.75. The tax rate is 30% and DD is financed with 40 % debt. Unlevered Bels What is the company's unlevered beta? 12-3, Ethier Enterprise has an unlevered beta of 1.0. Ethier is financed with 50% debt and has a Premum fo levered beta of 1.6. If the risk-free rate is 5.59% and the market risk premium is 6%, how much is Financial Risk the additional premium that Ethier's shareholders require to...
Repeat #2 A firm has EBIT of $15,800,000.00, total assets of $100,000,000.00, a tax rate of...
Repeat #2 A firm has EBIT of $15,800,000.00, total assets of $100,000,000.00, a tax rate of 40 percent, a cost of debt of 8.0 percent, and a debt/equity ratio of 1.00. As discussed in class, the ROE for a levered firm is also a function of a firm's return on assets (ROA) for an equivalent unlevered firm, plus a leverage effect, plus a tax shelter effect. Given the information above, determine what percentage of the firm's total return on equity...
Total Manufacturing has an expected EBIT of $40,000 per year in perpetuity and a tax rate...
Total Manufacturing has an expected EBIT of $40,000 per year in perpetuity and a tax rate of 20%. The firm currently has no debt. Its cost of debt is 8% and unlevered cost of capital is 14%. If the firm changes its capital structure by borrowing $120,000 to repurchase the same amount of equity, what would be the firm's value under the new capital structure?
Tool Manufacturing has an expected EBIT of $83,000 in perpetuity and a tax rate of 25...
Tool Manufacturing has an expected EBIT of $83,000 in perpetuity and a tax rate of 25 percent. The company has $145,000 in outstanding debt at an interest rate of 6.5 percent and its unlevered cost of capital is 14 percent. What is the value of the company according to MM Proposition I with taxes?
Firms U and L are in the same risk class and that both have EBIT =...
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MM Model with Corporate Taxes An unlevered firm has a value of $900 million. An otherwise identical but levered firm has $140 million in debt at a 5% interest rate. Its pre-tax cost of debt is 5% and its unlevered cost of equity is 10%. No growth is expected. Assuming the corporate tax rate is 35%, use the MM model with corporate taxes to determine the value of the levered firm. Enter your answers in millions. For example, an answer...
8. (Chapter 16) Company Z has perpetual annual EBIT equal to $70 million; a corporate tax rate of 21 percent, outstanding debt with market value $100 million; cost of debt equal to 6 percent; and unlevered cost of capital equal to 15 percent. (Assume the world of MM with taxes.) a. What is the total value of the equity in this firm? b. What is the required return on the (levered) equity? c. What is the WACC?
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