Reference no: EM133000618

-An all-equity firm expects its EBIT to be $155,000 every year in perpetuity. The firm currently has a cost of equity of 17 percent. The tax rate is 23 percent. The firm plans to borrow $184,000 at a pretax rate of 10.6 percent and use the proceeds to repurchase shares. What will the firm's cost of equity be after the recapitalization?

-A company is considering a project with an initial cost of $23,000. The project will produce a cash inflows of $12,000 after the first year and an additional $5,000 for each of the following three years. The firm has a pretax cost of debt of 6% and a cost of levered equity of 10%. The debt-equity ratio is 0.28 and the tax rate is 20%. The project has the same risk as the firm. What is the net present value of the project?

-A firm has 10,000 perpetual bonds outstanding. The bonds have a par value of $1,000 and a coupon rate of 6 percent paid annually. The nominal interest rate on these bonds is 5 percent. The firm also has 1 million shares of stock outstanding with a market price of $22 per share. What is the firm's market value debt-equity ratio?