What is the value of the levered firm

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An unlevered firm has a cost of capital of 16% and earnings before interest and taxes of $225,000. A levered firm with the same operations and assets has both a book value and a face value of debt of $850,000 with an 8% annual coupon. The applicable tax rate is 34%. What is the value of the levered firm?

Why when face value equal to book value ,the debt is considered a perpetuity debt

Reference no: EM132410970

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