Firm L has debt with a market value of $200,000 and a yield of 9%. The firm's equity has a market value of $300,000, its earnings are growing at a 5% rate, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 12%. Under the MM extension with growth, what would Firm L's total value be if it had no debt?
Value with debt = Value Levered = Value unlevered + Tax Shield from debt
Value levered = 200,000+300,000 = 500,000
Debt amount ...
The solution is given in about a paragraph's worth of calculations.