Problem:
L.A. Clothing has expected earnings before interest and taxes of $1,800, an unlevered cost of capital of 13 percent and a tax rate of 34 percent. The company also has $2,600 of debt that carries a 6 percent coupon. The debt is selling at par value.
Required:
Question: What is the value of this firm?
- $11,024.71
- $13,029.20
- $12,026.95
- $9,020.22
- $10,022.46
Note: Explain the solution in detail.