Explore BrainMass
Share

Levered value of the firm

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?

© BrainMass Inc. brainmass.com July 22, 2018, 5:08 am ad1c9bdddf

Solution Preview

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

Solution Summary

The solution computes the levered value of the firm.

$2.19