Question - Netphone Inc. expects the following: UCFBT= $1 million in perpetuity from the beginning of year 3 there is no income prior to that.
Ignore loss carryovers for taxes.
Tax rate is 50%, amount of debt = 0
Rzero= 10%, Rb= 5%
In the above example, Netphone decides to buyback some shares using 1 million dollars of perpetual debt. This is done today. Find Netphone's equity value today.