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Homework answers / question archive / A firm has an EBIT of $210,000 and a tax rate of 30 percent
A firm has an EBIT of $210,000 and a tax rate of 30 percent. The firm has a WACC of 6.5%. According to the traditional approach to capital structure, the value of the firm is approximately
Group of answer choices
1.88 million
2.64 million
2.26 million
3.77 million
| Value of unlevered firm = EBIT*(1-tax rate)/unlevered cost of equity |
| =210000*(1-0.3)/0.065 |
| =2261538.46 |
=2.26 million
