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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?

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Current Value of firm or unlevered... View the full answer

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