Problem:
Cede & Co. can borrow at 10.50 percent. Cede currently has no debt, and the cost of equity is 17.00 percent. The current value of the firm is $658,000. The corporate tax rate is 38 percent.
Required:
Question: What will the value be if Cede borrows $221,000 and uses the proceeds to repurchase shares?
- $879,000
- $795,020
- $471,040
- $387,060
- $741,980
Note: Please provide full description.