What is the value of the firm

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Problem: Suppose a firm expects it's EBIT to be 105,000 per year forever. Assume the firm can borrow at 6.75% ad has a tax rate of 32%. If the firm has no debt and a cost of equity of 10.25%, what is the value of the firm?

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Question: Now suppose the firm borrows $120,000 and uses the proceeds to repurchase shares. Now what is the value of the firm? Please describe your solutions.

Reference no: EM132419258

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