Kline Construction is an all-equity firm that has projected perpetual earnings before interest and taxes of $879,000. The current cost of equity is 18.3 percent and the tax rate is 34 percent. The company is in the process of issuing $6.2 million of 8.5 percent annual coupon bonds at par. What is the levered value of the firm?
Formula: Value of Unlevered Firm = EBIT*(1-tax rate)/Unlevered Cost of ...
The solution computes the levered value of the firm.