24 Jul WHAT IS THE VALUE OF THE UNLEVERED FIRM VU?
Companies U and L are identical in every respect except that U is unlevered while L has Show more Miller Model Companies U and L are identical in every respect except that U is unlevered while L has $10 million of 8% bonds outstanding. Both firms have an EBIT of $3 million. Assume that all of the MM assumptions are met. Suppose that both firms are subject to a 35% federal-plus-state corporate tax rate investors in both firms face a tax rate of Td = 28% on debt income and Ts = 20% (on average) on stock income and the appropriate required pre-personal-tax rate rsU is 10%.What is the value of the unlevered firm VU? Enter your answer in millions. For example an answer of $1.2 million should be entered as 1.2 not 1200000. Round your answer to two decimal places. 1. Suppose that both firms are subject to a 35% federal-plus-state corporate tax rate investors in both firms face a tax rate of Td = 28% on debt income and Ts = 20% (on average) on stock income and the appropriate required pre-personal-tax rate rsU is 10%. a. What is the value of the unlevered firm VU? b. What is the value of the levered firm VL? 2. Keep the other assumptions (D = $10 million rd = 8% EBIT = $3 million and rsU = 10%) but now suppose Td = Ts = 0 and Tc = 40%. a. What is the value of the unlevered firm VU? b. What is the value of the levered firm VL? 3. Keep the other assumptions (D = $10 million rd = 8% EBIT = $3 million and rsU = 10%) but now suppose that Td = 28% Ts = 28% and Tc = 40%. a. Now what is the value of the levered firm? b. What is the gain from leverage? Show less
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.