1.a) Suppose the firm has a value of $294,666.67 when it is all equity...
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Accounting
1.a)
Suppose the firm has a value of $294,666.67 when it is all equity financed. Now assume the firm issues $69,000 of debt paying interest of 6% per year and uses the proceeds to retire equity. The debt is expected to be permanent.
What will be the value of the firm? Enter your answer rounded to two decimal places.
What will be the value of the equity after the debt issue? Enter your answer rounded to two decimal places.
b) MacKinnon Co. currently has EBIT of $42,000 and is all equity financed. EBIT is expected to stay at this level indefinitely. The firm pays corporate taxes equal to 30% of taxable income. The cost of equity for this firm is 14%.
What is the market value of the firm? Enter your answer rounded to two decimal places.
Thanks so much in advance!
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