Question

Bruin industries just issued $275,000 of perpetual 6 percent debt and used the proceeds to repurchase stock. the company expects to generate $126,000 of earnings before interest and taxes in perpetuity. the company distributes all its earnings as dividends at the end of each year. the firm's unlevered cost of capital is 12 percent, and the corporate tax rate is 34 percent.

Answer 1

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