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Your firm is operating in a world where the only imperfection is that corporations must pay...

Your firm is operating in a world where the only imperfection is that corporations must pay tax. The company is currently all equity financed. Your company has 1,900,000 shares outstanding. Your firm expects to generate earnings before interest and taxes of $2,950,000 per year in perpetuity. The company is planning on borrowing $6,500,000 and using the proceeds of the loan to repurchase some of its outstanding shares. The unlevered cost of equity is 9.20%. The company's cost of debt before taxes is 4.10%. The tax rate is 20.00%.

What will be the value of firm after the recapitalization (borrow the money and repurchase shares) is completed?

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