Meyer & co. expects its ebit to be $111,000 every year forever. the firm can borrow at 6 percent. t
he company currently has no debt, and its cost of equity is 13 percent.

a. if the tax rate is 25 percent, what is the value of the firm? (do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

b. what will the value be if the company borrows $235,000 and uses the proceeds to repurchase shares? (do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

a. $640,384.62

b. $699,134.62

Explanation:

a. The computation of the value of the firm is shown below:

= EBIT × ( 1 - tax rate) ÷  cost of equity

= $111,000 × ( 1 - 0.25) ÷ 13%

= $83,250 ÷ 13%

= $640,384.62

b.  The computation of the value of the firm in second case is shown below:

= Value of the firm + borrowed amount × tax rate

= $640,384.62 + $235,000 × 25%

= $640,384.62 + $58,750

= $699,134.62

the correct answer would be b, when, queen, calder hall and london.

explanation:

we always capitalize words when a paragraph or sentence is starting, when an important name is used, when a place is being written, or simply when a noun is used, etc. so in this sentence, sentence is starting from 'when', so it will be written in capital letters. secondly, queen is considered to be an important person, so it will also be written in capital letter. next, the name of the town is mentioned, i-e calder hall, which will also be written in capital letters. in the last,   city name is being used, 'london', which will also be written in capital letters. so option b is the most appropriate one.