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XYZ Corporation expects an EBIT of $8000 every year forever XYZ Corporation currently has no debt and its cost of equity is 20 percent The firm can borrow at 8 percent If the corporate tax is

XYZ Corporation expects an EBIT of $8,000 every year forever. XYZ Corporation currently has no debt, and its cost of equity is 20 percent. The firm can borrow at 8 percent. If the corporate tax is 40 percent:a) What is the value of the firm? Firm Value = $b) What will the value be if XYZ Corporation issues $9,600 of debt and uses the proceeds to buy back stock? Firm Value = $c) What will the value be if XYZ Corporation issues $24,000 of debt and uses the proceeds to buy back stock? Firm Value = $

 

May 01 2020 View more View Less

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