North Corp. EBIT is $200. It has a debt-equity ratio of 25% and a WACC of 16%. Debt interest is 12%. Without taxes, what is the value of the firm?

Value of the firm = 25000

Explanation:

Use the below formula to find the value of firm.

Degree of Financial Leverage = EBIT / ( EBIT​ - Interest)

Degree of Financial Leverage = 0.25

0.25={200/ {200-Interests}

Interests amount = - 600

Interest amount = debt × Cost of Debts

Debt amount = Interest amount / Cost of Debt

Debt amount = - 600 / 0.12.

Debt amount = -5000

Now find the debt equity ratio:

Debt-equity ratio =  debt / equity

Given Debt amount = 5000

0.25= 5000 / Equity

Equity =5 000 /0.25

The value of Equity = 20,000

Now, the value of the firm = Equity amount + Debt amount

The value of the firm = 20000 + 5000

The value of the firm = 25000

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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