Colt systems will have ebit this coming year of 33 million, Ask an Expert

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Colt Systems will have EBIT this coming year of $33 million. It will also spend $14 million on total capital expenditures and increases in the net working capital, and have $8 million in depreciation expenses. Colt is currently an all equity firm with a corporate tax rate of 30% and a cost of capital of 12%.

a. if Colt is expected to grow by 8.1% per year, what is the market value of its equity today?

b. If the interest rate on its debt is 10%, how much can colt borrow now and still have non-neg net income this camping year? c. Is there a tax incentive today for Colt to choose a debt to value ratio that exceeds 85%?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91618365

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