As a Consultant to First Responder Inc ?
A) $7,143
B) $8,000
C) $7,357
D) $5,357
E)

Multiple Choice

As a consultant to First Responder Inc. ,you have obtained the following data (dollars in millions) .The company plans to pay out all of its earnings as dividends,hence g = 0.Also,no net new investment in operating capital is needed because growth is zero.The CFO believes that a move from zero debt to 80.0% debt would cause the cost of equity to increase from 10.0% to 12.0%,and the interest rate on the new debt would be 9.0%.What would the firm's total market value be if it makes this change? Hints: Find the FCF,which is equal to NOPAT = EBIT(1 - T) because no new operating capital is needed,and then divide by (WACC - g) .Do not round your intermediate calculations. $\begin{array}{lrlr}\text { Oper income (EBIT) } & \$ 800 & \text { Tax rate } & 40.0 \% \\\text { New cost of equity }\left(\mathrm{r}_{\mathrm{s}}\right) & 12.00 \% & \text { New wd } & 80.0 \% \\\text { Interest rate }\left(\mathrm{r}_{\mathrm{d}}\right) & 9.00 \% & &\end{array}$
?

A) $7,143
B) $8,000
C) $7,357
D) $5,357
E) $5,929