Corp: reading 30 page 129 Q14 and q17: EBIT(1-tax) or not?? equity, why, reading, return

brain_wash_your

in q14, for Aquarius’s, it use EBIT(1-tax)/wacc to get total firm value
while in q18, it use EBIT(1-tax)/r (return of equity) to get Vu, then
Vl=Vu+tD, what Vu and Vl mean?
why in q18, when use EBIT to get Vu, no need to be after tax? Thanks.

RMontgomery

Vu is value of the firm (unlevered) so without depreciation tax shield
Vl is levered or with the tax shield
I havent looked at the problem but if they assume the MM propositions without taxes then you would not use the after tax number to get value of the firm.