Bruce amp co expects its ebit to be 185000 every year, Financial Management

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Bruce amp co expects its ebit to be 185000 every year

Bruce & Co expects its EBIT to be $185,000 every year, forever. The firm can borrow at 9%. Bruce currently has no debt and its cost of equity is 16%. The tax rate is 35%.

a) What is the value of the firm?

b) What is the value of the firm if Bruce decides to borrow $135,000 and uses the proceeds to repurchase shares? Clearly show your work.

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Financial Management: Bruce amp co expects its ebit to be 185000 every year

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Financial Management: Bruce amp co expects its ebit to be 185000 every year

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