Houston Tools has expected earnings before interest and taxes of $189,400, an unlevered cost of capital of 12.87 percent, and a tax rate of 34 percent. The company has $318,000 of debt that carries a coupon rate of 6.2 percent. The debt is selling at par value. What is the value of this firm?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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6
Houston Tools has expected earnings before interest and taxes of $189,400, an unlevered cost of capital
of 12.87 percent, and a tax rate of 34 percent. The company has $318,000 of debt that carries a coupon
rate of 6.2 percent. The debt is selling at par value. What is the value of this firm?
A $978,758.89
B $1,113,758.89
C
$996,758.89
D.
$1,079,402.05
Transcribed Image Text:6 Houston Tools has expected earnings before interest and taxes of $189,400, an unlevered cost of capital of 12.87 percent, and a tax rate of 34 percent. The company has $318,000 of debt that carries a coupon rate of 6.2 percent. The debt is selling at par value. What is the value of this firm? A $978,758.89 B $1,113,758.89 C $996,758.89 D. $1,079,402.05
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