Eccles Inccorporated
Eccles Incorporated, a zero growth firm, has an expected EBIT of $100,000 and a corporate tax rate of 25%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%.
Refer to the data for Eccles Incorporated. What is the value of the firm according to MM with corporate taxes?
A. $480,938
B. $534,375
C. $593,750
D. $653,125
E. $718,438
Answer: C
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