The Aggie Company has EBIT of £50,000 and market value debt of £100,000 outstanding with a 9% coupon rate.The cost of equity for an all equity ﬁrm would be 14%.Aggie has a 35% corporate tax
Rate.Investors face a 20% tax rate on debt receipts and a 15% rate on equity.Determine the value of
Aggie.
A)£120,000
B)£162,948
C)£258,537
D)£263,080
E)£332,143

Question

Quizplus · Accepted Answer

The Answer of The Aggie Company has EBIT of £50,000 and market value debt of £100,000 outstanding with a 9% coupon rate.The cost of equity for an all equity ﬁrm would be 14%.Aggie has a 35% corporate tax
Rate.Investors face a 20% tax rate on debt receipts and a 15% rate on equity.Determine the value of
Aggie.
A)£120,000
B)£162,948
C)£258,537
D)£263,080
E)£332,143

The Aggie Company Has EBIT of £50,000 and Market Value