1. Maslyn Corp. has an EBIT of $980,000 per year that is expected to continue in

Question

1. Maslyn Corp. has an EBIT of $980,000 per year that is expected to continue in perpetuity. The unlevered cost of equity for the company is 14 percent, and the corporate tax rate is 35 percent. The company also has a perpetual bond issue outstanding with a market value of $1.93 million. What is the value of the company? (Enter your answer in dollars, not millions of dollars (o.g 1.234,567). Do not round intermediate calculations and round your answer to 2 decimal places (e.g., 32.16).) Value of the company eBook & Resources

Explanation / Answer

value of company = EBIT *(1-tax rate)/unlevered cost + tax rate * debt

= 980000*(1-0.35)/14% + 0.35 * 1930000

= 5225500

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.