VALUATION: FACTORS AND METHODS

S / (B+S) = the firm’s equity-to-value ratio. rB = the pre-tax cost of debt. rS = the cost of equity for a levered firm. TC = the corporate tax rate. While the problem does not list Williamson’s debt-to-value ratio or Williamson’s equity-to-value ratio, it does say that the firm’s debt-to-equity ratio is 2.5. ................
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