Problem:
Canfield motors expects its earnings before interest and taxes to be $196,000 a year forever. currently, the firm has no debt. the cost of equity is 15.4% and the tax rate is 34%. The compan is in the process of issuing $1.5 million of bonds at par that carry an 8% annual coupon.
Requirement:
Question: What is the unlevered value of the firm?
a. 936000
b. 941000
c. 950000
d. 915000
e. 840000
Note: Explain all calculation and formulas.