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    Levered value of the firm

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    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?

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    Formula: Value of Unlevered Firm = EBIT*(1-tax rate)/Unlevered Cost of ...

    Solution Summary

    The solution computes the levered value of the firm.