Bruce & Co

question 11

Multiple Choice

Bruce & Co. expects its EBIT to be $100,000 every year forever. The firm can borrow at 10 percent. Bruce currently has no debt, and its cost of equity is 20 percent. The tax rate is 31 percent. What will the value of Bruce & Co. be if the firm borrows $54,000 and uses the loan proceeds to repurchase shares?

• A)$280,130
• B)$346,600
• C)$361,740
• D)$378,900
• E)$381,520

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Definitions:

Business People

Individuals engaged in commercial, industrial, or professional activities, often with the aim of generating profit.

Provincial Business Society

A regional organization or association focused on the promotion and support of local business endeavours and interests.

Lawyer-Client Relationship

The professional association between a lawyer and their client, characterized by trust, confidentiality, and the obligation to provide competent legal representation.

Decision-Maker

An individual or group responsible for making decisions, especially those affecting business, policy, or legal outcomes.