What is the value of the unlevered firm what is the cost of, Financial Management

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What is the value of the unlevered firm what is the cost of

Cede & Co. expects its EBIT to be $81,400 every year forever. The firm can borrow at 7 percent. The firm currently has no debt, and its cost of equity is 14 percent. If the tax rate is 35 percent.

a. What is the value of the unlevered firm?

b. What will the value be if the firm borrows $145,000 and uses the proceeds to repurchase shares?

c. What is the cost of equity after recapitalization?

d. What is the WACC? What are the implications for the firm’s capital structure decision?

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Financial Management: What is the value of the unlevered firm what is the cost of

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