Tuesday, January 3, 2012

What is the unlevered and levered value of the firm?

Naylor productsis an all equity firm that has projected perpetual EBIT of $62,000 a year. The cost of equity is 14.6 percent and the tax rate is 34 percent. The firm can borrow money at 7.5 percent. Currently, the firm is considering converting to a debt equity ratio of .6. Whats the unlevered and levered value of the firm?

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