contestada

Janetta Corp. has an EBIT of $1,010,000 per year that is expected to continue in perpetuity. The unlevered cost of equity for the company is 15 percent, and the corporate tax rate is 35 percent. The company also has a perpetual bond issue outstanding with a market value of $1.99 million.

Required:
What is the value of the company?

Respuesta :

abiolataiwo2015

Answer:

$5,073,166.67

Explanation:

Calculation to determine the value of the company

Using this formula

VL= [EBIT(1 − TC) / R0] + TCB

Let plug in the formula

VL= [$1,010,000(1 − .35) / .15] + .35($1,990,000)

VL=[$1,010,000(0.65)/.15]+696,500

VL=($656,500/.15)+$696,500

VL=$4,376,666.67+$696,500

VL= $5,073,166.67

Therefore the value of the company is $5,073,166.67

Otras preguntas