UNLEV Has an Expected Perpetual EBIT = $4,000

question 35

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's equity after the restructuring?

• A) $11,792
• B) $12,600
• C) $12,819
• D) $13,592
• E) $16,461

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Definitions:

Employer Branding

Strategies and processes employed by organizations to position themselves as preferred employers and attract prospective and retain current employees.

Human Capital

The abilities, skills, experience, and knowledge possessed by individuals.

Skills

Abilities and expertise acquired through practice and education, which allow individuals to perform tasks effectively.

Knowledge Potential

The capacity or ability of individuals or organizations to acquire, develop, and utilize knowledge for innovation or improvement.