The Coffee Shop has expected earnings before interest and taxes of $14,600, an unlevered cost of capital of 12%, and debt with both a book and face value of $18,000. The debt has an annual 8.25% coupon. The tax rate is 35%. What is the value of the firm?

A) $81,640
B) $85,383
C) $87,778
D) $90,114
E) $92,309

Unlevered Cost

Unlevered Cost typically refers to the cost of an investment or project without taking into account the effects of debt financing, showing the cost purely from an equity perspective.

Coupon

A coupon, in finance, refers to the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity.

Tax Rate

The fraction of earnings or profits on which the government imposes taxes on individuals or corporations.