the valero corporation expects an ebit of 5000, Finance Basics

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the valero corporation expects an ebit of 5000

The Valero Corporation expects an EBIT of $5000 every year forever. Valero currently has no debt, and its cost of equity is 18%. Valero can borrow at 10%. If the corporate tax rate is 34%:

a. Explain what is the value of the firm?

b. Explain what will the value be if Corrado converts to 50% debt?

c. What will the value be if Corrado converts to 100% debt?

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Finance Basics: the valero corporation expects an ebit of 5000

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