0% Plagiarism Guaranteed & Custom Written

what will be the increase in total market value for the firm?

01 / 10 / 2021 Assignment

This paper circulates around the core theme of what will be the increase in total market value for the firm? together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.

A consultant has collected the following information regarding Hobbit Manufacturing:

Operating income (EBIT) $600 million, Interest expense $0, Tax rate 40%, Debt $0, Cost of equity 7%, WACC 7% . The company has no growth opportunities (g = 0), so the company pays out all of its earnings as dividends . Hobbit can borrow money at a pre-tax rate of 6%. The consultant believes that if the company moves to a capital structure consisting of 30% debt and 70% equity (based on market values), which would require taking on debt in the amount of $1,617 million, that the cost of equity will increase to 8% and the pre-tax cost of debt will remain at 6%, but the value of the firm will rise. Is the consultant correct? If the company makes this change, what will be the increase in total market value for the firm?



International House, 12 Constance Street, London, United Kingdom,
E16 2DQ

Company # 11483120

Benefits You Get

  • Free Turnitin Report
  • Unlimited Revisions
  • Installment Plan
  • 24/7 Customer Support
  • Plagiarism Free Guarantee
  • 100% Confidentiality
  • 100% Satisfaction Guarantee
  • 100% Money-Back Guarantee
  • On-Time Delivery Guarantee
FLAT 50% OFF ON EVERY ORDER. Use "FLAT50" as your promo code during checkout