Asked Nov 7, 2019

the winter wear company has expected earnings before interest and taxes of 2,100, and unlevered cost of capital of 14% and a tax rate of 34%. the company also has 2,800 of debt that carries a 7 percent coupon. the debt is selling at par value. what is the value of this firm?


Expert Answer

Step 1

Computation of value of unlevered firm:

 The value of firm is ...


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EBIT X (1-Tax rate Value of unlevere d Firm Unlevered cost of capital S2.100 x (1-0.34) 0.14 = $9.900


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