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  3. 19. old schools expects an ebit of $100,000 every

19. Old Schools expects an EBIT of $100,000 every year forever. The firm currently has...

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Accounting

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19. Old Schools expects an EBIT of $100,000 every year forever. The firm currently has no debt, and its cost of equity is 10 percent. The firm can borrow at 8 percent and the corporate tax rate is 20 percent. What will the value of the firm be if it converts to 50 percent debt? (40 percent of the levered firm value.) A. $8,895,870.11 B. $1,250,000 D. $680,000.00 E. None of the above

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