Problem 16-14 MM and Taxes [LO2] Fields & Company expects its EBIT to be $119,000 every year forever. The firm can borrow at 8 percent. The company currently has no debt, and its cost of equity is 15 percent. a. If the tax rate is 23 percent, what is the value of the firm? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What will the value be if the company borrows $275,000 and uses the proceeds to repurchase shares? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Value of the firm b. Value of the firm

Problem 16-14 MM and Taxes [LO2] Fields & Company expects its EBIT to be $119,000 every year forever. The firm can borrow at 8 percent. The company currently has no debt, and its cost of equity is 15 percent. a. If the tax rate is 23 percent, what is the value of the firm? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What will the value be if the company borrows $275,000 and uses the proceeds to repurchase shares? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Value of the firm b. Value of the firm

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter16: Financial Planning And Control

Section: Chapter Questions

Problem 15PROB

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