Bright Morning Foods has expected earnings before interest and taxes of $48,600,an unlevered cost of capital of 13.2 percent,and debt with both a book and face value of $25,000.The debt has an 8.5 percent coupon.The tax rate is 34 percent.What is the value of the firm?
A)$245,500
B)$247,600
C)$251,500
D)$264,800
E)$271,300

Question

Quizplus · Accepted Answer

V_U = [$48,600 × (1 - 0.34)]/0.132 = $243,000V_L = $243,000 + (0.34 × $25,000) = $251,500

Bright Morning Foods Has Expected Earnings Before Interest and Taxes