Add leverage and maintain interest coverage ratio

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Reference no: EM132018851

Boogle is back and has no debt! Boogle has an equity Beta of 1.6, with market expected return of 10% and a risk free rate of 3%. Boogle’s cash flows are expected to be 80 million next year and will grow at 3% per year. Boogle has 4 million shares outstanding. If Boogle wants to add debt and maintain an interest coverage ratio of 10%, where corporate taxes are 40% and the cost of debt capital will be 5%.

What will be Boogle’s value if you add leverage and maintain an interest coverage ratio of 10%?

Reference no: EM132018851

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