A firm that generates ebit of 5m every year has 50m of debt, Ask an Expert

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A firm that generates EBIT of $5M every year has $50M of debt outstanding that pays annual interest at a rate of 6%. The required return on the assets of an otherwise identical unlevered company is 12%.

What should be the value of the firm if it is subject to a corporate income tax rate of 40% and the present value of its expected bankruptcy costs were $10M?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92702545

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