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Problem:

The Gift Mart is an all-equity firm with a current cost of equity of 19.6 percent. The estimated earnings before interest and taxes are $239,000 annually forever. Currently, the firm has no debt but is in the process of borrowing $400,000 at 9.5 percent interest. The tax rate is 30 percent.

Required:

Question: What is the value of the unlevered firm?

$ 849,207
$ 853,571
$ 856,411
$ 919,307
$ 926,667

Note: Please show basic calculation

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91169869

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