Suppose a firm expects it's EBIT to be 105,000 per year forever. Assume the firm can borrow at 6.75% ad has a tax
rate of 32%. If the firm has no debt and a cost of equity of 10.25%, what is the value of the firm?
Now suppose the firm borrows $120,000 and uses the proceeds to repurchase shares. Now what is the value of the firm?