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Loan proceeds to repurchase shares

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BC Co. expects its EBIT to be $200,000 every year forever. The firm can borrow at 5 percent. BC currently has no debt, and its cost of equity is 15 percent. The tax rate is 30 percent. What will the value of BC Co. be if the firm borrows $20,000 and uses the loan proceeds to repurchase shares?

Reference no: EM132382953

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