September 2023 Which one of the following statements is correct To maximize the value of a firm you need to maximize the
2024 Q8a Assignment Help
Which one of the following statements is correct To maximize the value of a firm you need to maximize the 2023
Which one of the following statements is correct? To maximize the value of a firm you need to maximize the firm’s WACC. A Chapter 7 bankruptcy is a legal process for reorganizing a firm. Investors can use homemade leverage to offset firm leverage. To maximize the value of a firm you need to borrow as much as you can. 2. A firm has 100,000 shares of stock outstanding. The firm is considering borrowing $1.3 million at 7.5% interest and using the loan proceeds to repurchase 25,000 shares of stock. What is the value of the firm? Ignore taxes. $5.20 million $5.98 million $6.50 million $7.25 million 3. A firm has a debt-equity ratio of 1.0. The required return on the firm’s assets is 16.1% and the pre-tax cost of debt is 9.1%. Ignore taxes. What is the firm’s cost of equity? 15.3% 18.2% 23.1% 21.7% 4. A company is an all-equity firm that has projected earnings before interest and taxes (EBIT) of $500,000 forever. The current cost of equity is 15% and the tax rate is 33%. The company is in the process of issuing $1.5 million of bonds at par that carry a 6% annual coupon. What is the unlevered value of the firm (in millions)? (Note: You should use MM capital structure model with corporate taxes, but without personal taxes and bankruptcy costs.) $2.05 million $2.23 Million $2.56 Million $2.85 Million 5. From Question 4, what is the levered value of the firm (in millions) ?_______ $2.05 million $2.36 million $2.56 million $2.73 million
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