UNLEV Has an Expected Perpetual EBIT = $4,000

question 309

Multiple Choice

UNLEV has an expected perpetual EBIT = $4,000. The unlevered cost of capital = 15% and there are 20,000 shares of stock outstanding. The firm is considering issuing $8,800 in new par bonds to add financial leverage to the firm. The proceeds of the debt issue will be used to repurchase equity. The cost of debt = 10% and the tax rate = 34%. There are no flotation costs.

What is the value of UNLEV after the restructuring?

• A) $15,930
• B) $17,600
• C) $18,519
• D) $20,592
• E) $22,461

---

Definitions:

Cash Receipts

The collection of money, typically in the form of cash or checks, received by a business.

Electronic Cash Registers

Machines or systems used at retail checkout points to calculate and record sales transactions, accept payments, and store cash.

Designated Personnel

Individuals who are specifically chosen or assigned to carry out particular tasks or responsibilities.

Cash Receipts

The actual money received during a given period, including all forms of payment such as cash, checks, and credit card payments.