Meyer & Co. expects its EBIT to be $61,000 every year forever. The firm can borrow at 7 percent. Meyer currently has no debt, and its cost of equity is 14 percent.
1) If the tax rate is 35 percent, what is the value of the firm?
The answer is $283,214.29
2) What will the value be if the company borrows $148,000 and uses the proceeds to repurchase shares?
** I keep getting $235,114.29 which it wrong. Help Please and Thanks!
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