QUESTION 3 4.55 p Bavarian Brewhouse is an unlevered firm with a current cost of...
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QUESTION 3 4.55 p Bavarian Brewhouse is an unlevered firm with a current cost of equity of 10% and 250,000 shares outstanding. The company is considering a proposal that involves issuing $1 million in debt and using all the proceeds to repurchase outstanding stock. The debt would have an interest rate of 6%. If the firm has expected annual EBIT of $1,500,000 per year and a tax rate of 35%, what will be the total value of the firm after taking on the proposed level of leverage? Except for taxes, assume that markets are perfect.(ng bankruptcy, etc.). $15,350,000 $975,000 $15,000,000 $10,100,000 $10,000,000
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