Compute the market value of a levered corporation and its cost of capital knowing that the debt ratio is 0.25 and the perpetual EBIT equals 30000 um. Total risk-free debts are in value of 70000 um and the return on debts is 4%. The corporate tax rate is 16%. the return on debts

Compute the market value of a levered corporation and its cost of capital knowing that the debt ratio is 0.25 and the perpetual EBIT equals 30000 um. Total risk-free debts are in value of 70000 um and the return on debts is 4%. The corporate tax rate is 16%. the return on debts

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter17: Multinational Capital Structure And Cost Of Capital

Section: Chapter Questions

Problem 12QA

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Question

Compute the market value of a levered corporation and its cost of capital knowing that the debt ratio is 0.25 and the perpetual EBIT equals 30000 um. Total risk-free debts are in value of 70000 um and the return on debts is 4%. The corporate tax rate is 16%.
the return on debts

V_CORP	E	Ke	WACC	ERP	FRP

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