Dupuis can borrow at 800 percent Dupuis currently has no deb

Dupuis can borrow at 8.00 percent. Dupuis currently has no debt, and the cost of equity is 12 percent. The current value of the firm is $628,000. The corporate tax rate is 30 percent.

What will the value be if Dupuis borrows $211,000 and uses the proceeds to repurchase shares?

Hi,

Please find the detailed answer as follows:

Value of the Firm = Value of the Unlevered Firm + Tax Rate*Amount Borrowed = 628000 + 30%*211000 = $691300

Answer is $691300

Thanks.

Dupuis can borrow at 8.00 percent. Dupuis currently has no debt, and the cost of equity is 12 percent. The current value of the firm is $628,000. The corporate

Dupuis can borrow at 800 percent Dupuis currently has no deb

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