Ask Question
9 July, 11:51

Calculate the market value of Lotle Group, a firm with total assets of $80 million and $30 million of perpetual debt in its capital structure. The firm's cost of equity is 14% and the cost of debt is 9%. Lotle expects annual, perpetual net operating income (EBIT) of $9 million and a marginal tax rate of 40%.

+4
Answers (1)
  1. 9 July, 15:00
    0
    The market value of Lotle Group is $ 83.53.

    Explanation:

    The market value of Lotle Group can be calculated by dividing the perpetual net operating income (EBIT) with company WAAC. Detail calculation is given below.

    MW = EBIT/WAAC = $ 9/10.775% = $ 83.53

    WAAC Calculation

    WAAC = 14% * (50/80) % + 9% (0.60) (30/80)

    WAAC = 8.75% + 2.025% = 10.775%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Calculate the market value of Lotle Group, a firm with total assets of $80 million and $30 million of perpetual debt in its capital ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers