Cede & Co. expects its EBIT to be $104,000 every year forever. The company can borrow at 8 percent. The company currently has no debt and its cost of equity is 14 percent. |
a. |
If the tax rate is 23 percent, what is the value of the company? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
b. | What will the value be if the company borrows $200,000 and uses the proceeds to repurchase shares? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
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