The ABC corp. is expected to have the earnings before interest and taxes of $60,000 and the unlevered cost of capital of the company is 12%. The corporate tax rate is 30%. If the company has issued a debt of $20,000 at par with annual coupon rate of 10%, what is the value of the levered firm? Calculate the value of the levered firm? (A) The value of the levered firm is $356,000 (B) The value of the levered firm is $352,850 (C) The value of the levered firm is $350,000 (D) The value of the levered firm is $352,000

The ABC corp. is expected to have the earnings before interest and taxes of $60,000 and the unlevered cost of capital of the company is 12%. The corporate tax rate is 30%. If the company has issued a debt of $20,000 at par with annual coupon rate of 10%, what is the value of the levered firm? Calculate the value of the levered firm? (A) The value of the levered firm is $356,000 (B) The value of the levered firm is $352,850 (C) The value of the levered firm is $350,000 (D) The value of the levered firm is $352,000

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter17: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 3P

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