1. How do investors view the degree of a firm's financial leverage? How will investors' perspective of financial leverage change as interest rates increase (assuming earnings before interest and taxes remain constant)? How do we know if leverage works for or against the owners of the firm?
2. KneeMan Markup Company has total debt obligations with book and market values equal to $25 million and $24 million, respectively. It also has total equity with book and market values equal to $30 million and $60 million, respectively. If you were going to buy all of the assets of KneeMan Markup today, how much should you be willing to pay?
Willing to pay $ _________ million