What is the value of the levered firm

Reference no: EM13269777

Jericho Snacks is an all-equity firm with estimated earnings before interest and taxes of $826,000 annually forever. Currently, the firm has no debt but is considering borrowing $650,000 at 6.75 percent interest. The tax rate is 34 percent and the current cost of equity is 17.2 percent. What is the value of the levered firm?

a. $3,506,418
b. $3,390,535
c. $3,187,271
d. $3,169,535
e. $3,307,271

Reference no: EM13269777

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