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Value of unleveraged firm and the value of equity

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-The National Powerhouse Company currently has no debt in its capital structure. The company has decided to restructure, raising $5 million debt at 12 per cent. ABC currently has 500 000 shares on issue at a price of $200 per share. As a result of the restructure, what is the minimum level of EBIT the company needs to maintain EPS (the break-even EBIT)?Ignore taxes

-ABC associates have estimated EBIT of 400, the tax rate is 35% and the Return on the Unleveraged Firm RUis 14%. Suppose ABC takes up the Debt from 0 to $200 at 10%, what is the Value of Leveraged Firm,Value of Unleveraged Firm and the Value of Equity?

Reference no: EM132679339

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