What is the value of the firm

Assignment Help Financial Management

Reference no: EM13929447

O’Connell & Co. expects its EBIT to be $83,000 every year forever. The firm can borrow at 11 percent. O’Connell currently has no debt, and its cost of equity is 15 percent.

1. If the tax rate is 35 percent, what is the value of the firm? (Round your answer to 2 decimal places. (e.g., 32.16)

2. What will the value be if the company borrows $144,000 and uses the proceeds to repurchase shares? (Round your answer to 2 decimal places. (e.g., 32.16))

Reference no: EM13929447

Questions Cloud

What us the definition of a troubled debt restructuring : NYY corp., a calendar year firm, sold equipment to Red Sox nation Inc. on Jan 1, 2010 and received in return a note, due on Dec 31, 2013, with a face value of $1,000,000, and bearing interest at a standard rate of 3% per year. What us the definition ..

What types of things would you want to highlight : The CEO of the insurance company you work for sends back the firm’s proposed budget which you had drafted, asking you to explain how this budget supports the firm’s strategies and goals. Discuss how you might demonstrate that your proposed budget is ..

Cost-effective continuing professional education : Hewett and Hefner, LLP is a regional public accounting firm with 34 offices throughout the south eastern United States. To provide employees with cost-effective continuing professional education, the company maintains an in-house education and traini..

What is the value of the firm : O’Connell & Co. expects its EBIT to be $83,000 every year forever. The firm can borrow at 11 percent. O’Connell currently has no debt, and its cost of equity is 15 percent. If the tax rate is 35 percent, what is the value of the firm? What will the v..

Firms stock price for few days surrounding news announcement : Moving money in and out of the market based on your market expectations is called _____ and tends to lead to returns that are _____ than the overall market return, assuming that the market is relatively efficient. Which one of the following involves ..

Options market value and price of the stock : The exercise price on one of Flanagan Company's options is $15, its exercise value is $23, and its time value is $6. What are the option's market value and the price of the stock?

What is the exercise value of the call option : A call option on the stock of Bedrock Boulders has a market price of $8. The stock sells for $29 a share, and the option has a strike price of $24 a share. What is the exercise value of the call option?

Calculate the average daily float : Your firm receives 10 checks per month. Of these, 6 are for $1,000 and 4 are for $500. The delay for the $1,000 checks is 5 days, and the $500 checks are delayed 8 days. Calculate the average daily float.

User Account

All Pages