Janetta Corp. has an EBIT rate of $750,000 per year that is expected to continue in perpetuity. The unlevered cost of equity for the company is 15%, and the corporate tax rate is 35%. The company also has a perpetual bond issue outstanding with a market value of $1.5 million.
Q1. What is the value of the company?
Q2. The CFO of he company informs the company president that the value of the company is $3.2 million. Is the CFO correct?