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Value of firm if it borrows funds to repurchase shares

M.G. Movers can borrow at 7.5 percent. The firm currently has no debt, and the cost of equity is 16 percent. The current value of the firm is $540,000. What will the value be if the firm borrows $160,000 and uses the proceeds to repurchase shares? The corporate tax rate is 34 percent.

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Value of a levered firm = Value unlevered + PV of interest tax ...

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The solution explains how to determine the value of firm if it borrows funds to repurchase shares

$2.19