The cost of debt is 8 for the levered firm find the value, Financial Management

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The cost of debt is 8 for the levered firm find the value

Please show formulas and calculations and not just results and numbers, and explain rationale for answers.

Chalk Inc. has a tax rate of 30% and an EBIT of $50 million. The unlevered cost of capital is 14%. a. What is the value of the unlevered firm? What is the cost of equity for the unlevered firm? b. Now suppose that Chalk issues $90 million in debt to buy back stock. The cost of debt is 8%. For the levered firm, find the value of the levered firm and the cost of equity.

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Financial Management: The cost of debt is 8 for the levered firm find the value

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Financial Management: The cost of debt is 8 for the levered firm find the value

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