Equity Investors Have Contributed $250,000 to Your Start-Up Business, While

question 12

Multiple Choice

Equity investors have contributed $250,000 to your start-up business, while creditors provided a loan of $300,000. You have calculated your firm's WACC at 10 percent. The annual interest payment is $25,000 and the marginal corporate tax rate is 21 percent. How much profit will your equityholders need to earn in order to break even in economic terms (i.e., EVA of zero) ?

• A)$25,000
• B)$35,250
• C)$30,000
• D)$13,075

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Definitions:

Direct Cost

Expenses that can be directly attributed to the production of specific goods or services, such as raw materials and labor costs.

Implementation Process

The series of actions taken to put a plan or strategy into action.

Advertising Campaign

An advertising campaign is a series of coordinated marketing messages, delivered across one or more channels, designed to influence consumer perception and drive them to a specific action, such as making a purchase.

Media Selection

The process of choosing the most appropriate media channels through which to deliver promotional messages to the target audience.