Market Value of Firm with Capital Structure
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Rotek has a capital structure of $300,000 in equity and $300,000 in perpetual debt. The firm's cost of equity is 14% and its cost of debt is 9 percent. If the firm has an expected perpetual net operating income of $120,000 and a marginal tax rate of 40%, what is the market value of RoTek? Assume all net income is paid out as dividends.
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This solution is comprised of a detailed explanation of how to determine market value of a firm given its capital structure.
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Given that,
Equity in capital structure=$300,000
Debt in capital structure=$300,000
Cost ...
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- MBA, Indian Institute of Finance
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