Please give me the correct answer and I will rate you :) Cede & Co. can borrow a

Question

Please give me the correct answer and I will rate you :)

Cede & Co. can borrow at 12.25 percent. Cede currently has no debt, and the cost of equity is 15.50 percent. The current value of the firm is $679,000. The corporate tax rate is 40 percent.

What will the value be if Cede borrows $228,000 and uses the proceeds to repurchase shares?(Do not include the dollar sign ($).)

Cede & Co. can borrow at 12.25 percent. Cede currently has no debt, and the cost of equity is 15.50 percent. The current value of the firm is $679,000. The corporate tax rate is 40 percent.

Explanation / Answer

The value of the unlevered firm is:

V = EBIT(1

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