What is the unlevered value of lsi

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LSI recently issued $195,000 of perpetual 9% debt and used the cash to do a stock repurchase. Earnings for LSI are anticipated to be $83,000 annually before interest and taxes. The company has a dividend payout of 100% of earnings and its unlevered cost of capital is 15%. Corporate taxes for LSI are 40%.

a) What is the unlevered value of LSI?
b) What is the value of the levered firm using the adjusted PV method??
c) What are an investor's expectations for the return on equity for the levered company??
d) What is the value of LSI equity using the flow to equity method?

 

Reference no: EM13259985

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