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Janetta Corp. has an EBIT rate of $975,000 per year that is expected to continue in perpetuity. The unlevered cost of equity for the company is 14 percent and the corporate tax rate is 35 percent. The...

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Janetta Corp. has an EBIT rate of $975,000 per year that is expected to continue in perpetuity. The unlevered cost of equity for the company is 14 percent and the corporate tax rate is 35 percent. The company has a perpetual bond issue outstanding with a market value of $1.9 million. What is the value of the company? If the CFO of the company informs the company president that value of the company is $4.8 million. Would the CFO be correct? Explain.
Answered Same Day Dec 26, 2021

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David answered on Dec 26 2021
119 Votes
Janetta Corp. has an EBIT rate of $975,000 per year that is expected to continue in perpetuity. The
unlevered cost of equity for the company is 14 percent and the corporate tax rate is 35 percent. The
company has a perpetual bond issue outstanding with a market value of $1.9 million. What is the
value of the company? If the CFO of the company informs the company...
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