Problemthe winter wear company has expected earnings before, Ask an Expert

Finance

Problem:

The Winter Wear Company has expected earnings before interest and taxes (EBIT) of $2,100, an unlevered cost of capital of 14% and a tax rate of 34%.

The company also has $2,800 of debt that carries a 7% coupon. The debt is selling at par value. What is the value of this firm?

A. $9,900

B. $10,852

C. $11,748

D. $12,054

E. $12,700

F. None of the above

Summary of question:

This question basically belongs to Finance as well as it discusses about computations of the value of a firm with earnings before interest and taxes, cost of capital, tax rate and debt selling at par value being given.

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