Uses proceeds to repurchase shares

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Bruce & Co. expects its EBIT to be $75,000 every year forever. The company can borrow at 12 percent. The company currently has no debt, and its cost of equity is 15 percent.   

If the tax rate is 35 percent, what is the value of the company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)      ___________

What will the value be if the company borrows $152,000 and uses the proceeds to repurchase shares? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)      Value of the comapny $ ___________

Reference no: EM131579149

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