XYZ, Inc

Subject:AccountingPrice: Bought3

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XYZ, Inc., a zero growth firm, has an expected EBIT of $100,000 and a corporate tax rate of 30%. SC uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%. What is the value of the firm with corporate taxes according to the MM model?

 

	a)  $475,875
	b)  $528,750
	c)  $587,500
	d)  $646,250