Running Deere firm is considering a target capital structure 35% debt and 65% equity. The cost of equity for an unlevered firm of Running Deere is 11% and the before tax cost of new debt issued is constant at 4%.(Please show work) Calculate the Weighted Average Cost of Capital (WACC) for the Levered Firm assuming the corporate tax rate is 40% (Please Show work) Calculate the Market Value of Levered Firm and the Market Value of Debt from Levered Firm if its operating income (EBIT) is $2,500,000 and corporate tax rate is 40%.(Please show work)

Running Deere firm is considering a target capital structure 35% debt and 65% equity. The cost of equity for an unlevered firm of Running Deere is 11% and the before tax cost of new debt issued is constant at 4%.(Please show work) Calculate the Weighted Average Cost of Capital (WACC) for the Levered Firm assuming the corporate tax rate is 40% (Please Show work) Calculate the Market Value of Levered Firm and the Market Value of Debt from Levered Firm if its operating income (EBIT) is $2,500,000 and corporate tax rate is 40%.(Please show work)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter13: Capital Structure Concepts

Section: Chapter Questions

Problem 4P

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