Ready To Go is an all-equity firm specializing in hot ready-to-eat meals.Management has estimated the firm's earnings before interest and taxes will be $68,000 annually forever.The present cost of equity is 14.1 percent.Currently, the firm has no debt but is considering borrowing $450,000 at 8 percent interest.The tax rate is 34 percent.What is the value of the unlevered firm?
A)$323,017
B)$346,511
C)$314,141
D)$318,298
E)$305,200

Question

Quizplus · Accepted Answer

The Answer of Ready To Go is an all-equity firm specializing in hot ready-to-eat meals.Management has estimated the firm's earnings before interest and taxes will be $68,000 annually forever.The present cost of equity is 14.1 percent.Currently, the firm has no debt but is considering borrowing $450,000 at 8 percent interest.The tax rate is 34 percent.What is the value of the unlevered firm?
A)$323,017
B)$346,511
C)$314,141
D)$318,298
E)$305,200

Ready to Go Is an All-Equity Firm Specializing in Hot