A firm has an expected perpetual ebit 6000 the unlevered, Ask an Expert

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A firm has an expected perpetual EBIT = $6,000. The unlevered cost of capital = 8% and there are 20,000 shares of stock outstanding. The firm is considering issuing $10,000 in new par bonds to add financial leverage to the firm. The proceeds of the debt issue will be used to repurchase equity. The cost of debt = 5% and the tax rate is 34%. There are no flotation costs.

What is the value of the equity after the restructuring?

What is the cost of equity after restructuring?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92288110

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