No debt company currently has no debt in its capital structure. It has 1,000 shares outstanding, an after-tax perpetual cash flow of $1,000, and a cost of unlevered assets of 20 percent. It has a beta of 1. The tax rate is 40 percent. The company intends to issue $2,500 of perpetual, riskless, debt, and pays an exceptional dividend with the proceeds. The firm will never change its debt level after issue (hold d constant at $2500 forever).
Answers
Answered by
0
Answer:
Money Inc., has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes [EBIT] are projected to be $14,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower.
Similar questions