Cavo Corporation expects an EBIT of $26,550 every year forever. The company curr

Question

Cavo Corporation expects an EBIT of $26,550 every year forever. The company currently has no debt, and its cost of equity is 14 percent. The corporate tax rate is 35 percent.

What will the value of the company be if it takes on debt equal to 60 percent of its levered value? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Cavo Corporation expects an EBIT of $26,550 every year forever. The company currently has no debt, and its cost of equity is 14 percent. The corporate tax rate is 35 percent.

What will the value of the company be if it takes on debt equal to 60 percent of its levered value? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Explanation / Answer

Value of Company = Ebit- Taxes/ Cost Of Equity

= 26550- 26550*35% / 14%

=123267.85

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