New Schools,Inc

Multiple Choice

New Schools,Inc.expects an EBIT of $7,000 every year forever.The firm currently has no debt,and its cost of equity is 15 percent.The firm can borrow at 8 percent and the corporate tax rate is 34 percent.What will the value of the firm be if it converts to 50 percent debt?

A) $31,796.47
B) $36,036.00
C) $37,407.16
D) $37,552.08
E) $38,119.30