What is the firm value

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A mature company in steady state is growing at 3% per year. It expects its EBIT next year to be $120,000, with depreciation of $10,500, capital expenditures of $15,000, and no increase in net working capital. None of these items are unusual. The company has a current D/E ratio of 10%, tax rate of 25%, and a beta of 1.05. The market risk premium is 5.5% and the risk free rate is 5%. Given its stable growth, the company is considering adding increasing its leverage. After consulting its bank, the company learned what interest rates it is likely to face as it increases its debt. D/E=10%, pretax cost of debt=6%, what is the firm value?

Reference no: EM132402961

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