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What is the value of the firm

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Reference no: EM132537860

Bombay Ltd., a zero-debt firm, expects EBIT to be INR 95000 every year till perpetuity. The firm can borrow at 11 percent and its cost of equity is 22 percent.

Find

i. If the tax rate is 25%, what is the value of the firm?

ii. Find the firm value if Bombay Ltd. borrows INR 60000 and uses the proceeds to repurchase shares.

Reference no: EM132537860

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