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QUESTION
Until It Sleeps Corporation expects EBIT of $14,000 every year forever. Until It Sleeps currently has no debt, and its cost of equity is 16%. The...
Until It Sleeps Corporation expects EBIT of $14,000 every year forever. Until It Sleeps currently has no debt, and its cost of equity is 16%. The firm can borrow at 9%. If the corporate tax rate is 35%, what is the value of a firm? What will the value be if the company converts to 50% debt? To 100% debt?.
