cost of debt 8% unlevered cost of capital 10% systematic risk of asset 1.5 1) Unlevered Firm Levered Firm EBIT 10000 10000 Interest 0 3200 Taxable Income 10000 6800 34% Tax 3400 2312 Net Income 6600...































































































































































































cost of debt8%
unlevered cost of capital10%
systematic risk of asset1.5
1)
Unlevered FirmLevered Firm
EBIT1000010000
Interest03200
Taxable Income100006800
34%Tax34002312
Net Income66004488
CFFA0-3200
2)PV of the tax shield?
Value of levered firm3200
tax rate34%
(value of levered firm*tax rate)/(1+cost of debt)
PV of tax shield1007.41
value of levered firm/cost of debt
3)Size of debt40000
4)
a)EBIT(1-T)/cost of capital
Value of unlevered firm66000
b)value of unlevered firm+Tax*size of debt
Value of levered firm79600
c)total value of unlevered firm-debt
Equity value39600

Hi I need help with subparts d,e, and f!  The first three are answered above! Thank you!


4.)Calculate the following values:
a) value of unlevered firm; b) value of the levered firm; c) equity value; d) Cost of equity; e) cost of capital; f) systematic risk of the equity






Jun 05, 2022
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