Houston Tools has expected earnings before interest and taxes of $189,400, an unlevered cost of capital of 12.87 percent, and a tax rate of 34 percent. The company has $318,000 of debt that carries a coupon rate of 6.2 percent. The debt is selling at par value. What is the value of this firm?
Houston Tools has expected earnings before interest and taxes of $189,400, an unlevered cost of capital of 12.87 percent, and a tax rate of 34 percent. The company has $318,000 of debt that carries a coupon rate of 6.2 percent. The debt is selling at par value. What is the value of this firm?
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 2P
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Houston Tools has expected earnings before interest and taxes of $189,400, an unlevered cost of capital of 12.87 percent, and a tax rate of 34 percent. The company has $318,000 of debt that carries a coupon rate of 6.2 percent. The debt is selling at par value. What is the value of this firm?
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