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An Allequity Firm Is Subject To A 30% Tax Rate Its Total Market Value Is

Question

Magnus Inc. has earnings before interest and tax (EBIT) of $10 million. There is $50 million of debt outstanding with a required rate of return of 6%. The required rate of return on assets in the industry is 12%. The corporate tax rate is 28%. There are no personal taxes. Compute the value of Magnus assuming that the present value of bankruptcy costs is $10 million. Finance