UNLEV Has an Expected Perpetual EBIT = $4,000

question 14

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

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Definitions:

Volcanic Eruptions

The process where magma, ash, and gases are expelled from a volcano, significantly impacting the surrounding environment.

Back-Arc Basin

A geological formation that occurs on the side of a subduction zone opposite the volcanic arc, where the oceanic crust is spreading and thinning.

Shallowest Seafloor

The part of the ocean floor that is closest to the water's surface, often found near coastlines or on continental shelves.

Oceanic Plateau

Large submarine elevations lying above the abyssal plains of the ocean, created by volcanic activity or large-scale uplift.