Dakota Co.has expected earnings before interest and taxes of $8,100,an unlevered cost of capital of 10 percent,and debt with both a book and face value of $14,000.The debt has an 8 coupon.The tax rate is 34 percent.What is the value of the firm?
A)$67,460
B)$53,460
C)$58,220
D)$61,000
E)$60,600

Question

Quizplus · Accepted Answer

V_U = [$8,100 × (1 - .34)]/.10 = $53,460V_L = $53,460 + (.34 × $14,000)= $58,220

Dakota CoHas Expected Earnings Before Interest and Taxes of $8,100,an Unlevered