An unlevered firm has after-tax net income = $125,000. The unlevered cost of capital is 13% and the corporate tax rate is 34%. What is the value of this firm?
A) $594,102
B) $634,615
C) $729,654
D) $961,538
E) $1,051,591

Question

Quizplus · Accepted Answer

The value of an unlevered firm can be calculated using the formula: Value = After-tax net income / Unlevered cost of capital. Plugging in the numbers: Value = $125,000 / 0.13 = $961,538.

An Unlevered Firm Has After-Tax Net Income = $125,000