Swedish Imports is an unlevered ﬁrm with an after-tax net income of $79,000. The unlevered cost of capital is 12% and the tax rate is 35%. What is the value of this ﬁrm?
A) $427,916
B) $514,250
C) $579,333
D) $611,407
E) $658,333

Question

Quizplus · Accepted Answer

The value of an unlevered firm is calculated as the net income divided by the unlevered cost of capital. Here, $79,000 / 0.12 = $658,333.

Swedish Imports Is an Unlevered ﬁRm with an After-Tax Net