Forbidden Fruit Extracts Expects Its Earnings Before Interest and Taxes

Multiple Choice

Forbidden Fruit Extracts expects its earnings before interest and taxes to be $287,600 a year forever.Currently,the firm has no debt.The cost of equity is 15.4 percent and the tax rate is 34 percent.The company is in the process of issuing $3 million of bonds at par that carry an annual coupon rate of 7.6 percent.What is the unlevered value of the firm?

A) $1,371,429
B) $1,331,971
C) $1,107,405
D) $969,325
E) $1,232,571