Janetta Corp. has an EBIT of $1,010,000 per year that is expected to continue in perpetuity. The unlevered cost of equity for the company is 15 percent, and the corporate tax rate is 35 percent. The company also has a perpetual bond issue outstanding with a market value of $1.99 million. Required: What is the value of the company?

1 answer
Question:

Janetta Corp. has an EBIT of $1,010,000 per year that is expected to continue in perpetuity. The unlevered cost of equity for the company is 15 percent, and the corporate tax rate is 35 percent. The company also has a perpetual bond issue outstanding with a market value of $1.99 million.
Required:
What is the value of the company?

Answers

Answer:$5,073,166.67Explanation:Calculation to determine the value of the companyUsing this formulaVL= [EBIT(1 − TC) / R0] + TCBLet plug in the formulaVL= [$1,010,000(1 − .35) / .15] + .35($1,990,000)VL=[$1,010,000(0.65)/.15]+696,500VL=($656,500/.15)+$696,500VL=$4,376,666.67+$696,500VL= $5,073,166.67Therefore the value of the company is $5,073,166.67

Similar Solved Questions

2 answers

Is NH3 a molecular crystal, metal, ionic crystal, or a network solid? 

Is NH3 a molecular crystal, metal, ionic crystal, or a network solid? ...
1 answer

Find the greatest common factor of: 25&15

Find the greatest common factor of: 25&15...
1 answer

When reading a text that's new to you, what's the main benefit of questioning in understanding the work? •It starts a dynamic, productive dialogue between you and the author. •It helps you find words and terminology to look up •It helps you find weak points in the author's argument Tyou can figure out ways to attack the text •It helps you practice before taking part in class discussion

When reading a text that's new to you, what's the main benefit of questioning in understanding the work? •It starts a dynamic, productive dialogue between you and the author. •It helps you find words and terminology to look up •It helps you find weak points in the author's argument Tyou can fi...
1 answer

What are considered the 7 deadly sins? Briefly explain their meaning.

What are considered the 7 deadly sins? Briefly explain their meaning....
2 answers

25. What word is used to describe the breakdown ofred blood cells?a. erythemab. erythrocytosisc. hemolysisd. hemostasisn​

25. What word is used to describe the breakdown ofred blood cells?a. erythemab. erythrocytosisc. hemolysisd. hemostasisn​...
1 answer

When dealing with casualties battalion commanders are responsible for completing which task?

When dealing with casualties battalion commanders are responsible for completing which task?...
1 answer

Brainliest % stars Thanks Correct answers Fast

Brainliest % stars Thanks Correct answers Fast...
2 answers

List some characteristics of the Gupta Golden age.

List some characteristics of the Gupta Golden age....
1 answer

Help ASAP please ill mark brainliest

help ASAP please ill mark brainliest...
1 answer

2. Is (x+2) a factor of r + 8x + 12

2. Is (x+2) a factor of r + 8x + 12...
1 answer

Pla help ill give brainlest i promise

pla help ill give brainlest i promise...
1 answer

An especially violent lightning bolt has an average current of 1.89 x 103 A lasting 0.133 s. How much charge is delivered to the ground by the lightning bolt?

An especially violent lightning bolt has an average current of 1.89 x 103 A lasting 0.133 s. How much charge is delivered to the ground by the lightning bolt?...
1 answer

Who obtained florida from the spanish?

Who obtained florida from the spanish?...
1 answer

So I'm using Khan Academy and I'm confused about what they did to get 72. What did they multiply or divide to get that?!?!

So I'm using Khan Academy and I'm confused about what they did to get 72. What did they multiply or divide to get that?!?!...
2 answers

Please help the picture is above.

Please help the picture is above....
2 answers

What type of organizational structure would a major nationwide insurance company use?

What type of organizational structure would a major nationwide insurance company use?...
1 answer

Matt has 4 deciliters of milk . Will the milk fill a 1-litre bottle

Matt has 4 deciliters of milk . Will the milk fill a 1-litre bottle...
1 answer

Indicate if the statement makes sense or not. Yo soy el (la) sobrino(a) de mis abuelos. Question 12 options: a) sí b) no

Indicate if the statement makes sense or not. Yo soy el (la) sobrino(a) de mis abuelos. Question 12 options: a) sí b) no...

-- 0.043256--