Challenging ABC Co. has a debt-equity ratio of 0.8, which wi…
Challenging ABC Co. has a debt-equity ratio of 0.8, which will stay the same forever. Their cost of debt is 8 percent per year, which means their annual interest payment is $0.60 million each year forever. The firm’s unlevered cost of capital is 15 percent and their tax rate is 25 percent. The firm’s assets will generate an annual EBIT of $3.0 million in perpetuity. Depreciation, agency costs, and bankruptcy costs are all zero in perpetuity. Using the Flow-to-Equity approach, what is the value of the company’s equity? (Enter your answer in dollars, not millions of dollars, rounded to the nearest dollar. E.g., for $2.5m enter 2500000, not 2.5)
Read DetailsChallenging ABC Co. has a debt-equity ratio of 0.8, which wi…
Challenging ABC Co. has a debt-equity ratio of 0.8, which will stay the same forever. Their cost of debt is 8 percent per year, which means their annual interest payment is $1.15 million each year forever. The firm’s unlevered cost of capital is 30 percent and their tax rate is 25 percent. The firm’s assets will generate an annual EBIT of $11.5 million in perpetuity. Depreciation, agency costs, and bankruptcy costs are all zero in perpetuity. Using the Flow-to-Equity approach, what is the value of the company’s equity? (Enter your answer in dollars, not millions of dollars, rounded to the nearest dollar. E.g., for $2.5m enter 2500000, not 2.5)
Read DetailsChallenging ABC Co. has a debt-equity ratio of 0.8, which wi…
Challenging ABC Co. has a debt-equity ratio of 0.8, which will stay the same forever. Their cost of debt is 6 percent per year, which means their annual interest payment is $1.20 million each year forever. The firm’s unlevered cost of capital is 15.0 percent and their tax rate is 25 percent. The firm’s assets will generate an annual EBIT of $8.0 million in perpetuity. Depreciation, agency costs, and bankruptcy costs are all zero in perpetuity. Using the Flow-to-Equity approach, what is the value of the company’s equity? (Enter your answer in dollars, not millions of dollars, rounded to the nearest dollar. E.g., for $2.5m enter 2500000, not 2.5)
Read Details