Divided Airlines is currently an unlevered firm. The company expects to generate $153.85 in EBIT in perpetuity. The corporate tax rate is 35%, implying after – tax earnings of $100. All earnings after tax are paid out as dividends. The firm is considering a capital restructuring to allow $200 of perpetual debt. Its cost of debt is 10%. Unlevered firms in the same industry have cost of equity of 20%. What is the new value of Divided Airlines (assuming t he cost of financial distress is 0)?

"Get 15% discount on your first 3 orders with us"
Use the following coupon

Order Now