0. Company – U and company – L are similar in all respects, except U is unlevered and L is having 10% debt of 10,00,000. Assume EBIT level of 3,60,000, tax rate of 30%, cost of all equity company at 18%. If all the assumption of MM hypothesis are satisfied, what is the value of company U and company – L. Does these values indicate the equilibrium, otherwise explain the process through which such equilibrium is achieved

0. Company – U and company – L are similar in all respects, except U is unlevered and L is having 10% debt of 10,00,000. Assume EBIT level of 3,60,000, tax rate of 30%, cost of all equity company at 18%. If all the assumption of MM hypothesis are satisfied, what is the value of company U and company – L. Does these values indicate the equilibrium, otherwise explain the process through which such equilibrium is achieved

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 3Q

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