Your Company Doesn't Face Any Taxes and Has $200 Million

question 98

Multiple Choice

Your company doesn't face any taxes and has $200 million in assets, currently financed entirely with equity. Equity is worth $10 per share, and book value of equity is equal to market value of equity. Also, let's assume that the firm's expected values for EBIT depend upon which state of the economy occurs this year, with the possible values of EBIT and their associated probabilities shown as follows:
$$\begin{array} { c c c } \text { State } & \text { Pessimistic } & \text { optimistic } & \\\text { Probability of state } & 0.25 & 0.75 \\\text { Expected EBIT in state } & \$ 5 \text { million } & \$ 25 \text { million } \end{array}$$
The firm is considering switching to a 40 percent debt capital structure, and has determined that they would have to pay an 8 percent yield on perpetual debt in either event. What will be the break-even EBIT?

• A) $13.6 million
• B) $15 million
• C) $16 million
• D) $20 million

Understand humor's role in public speaking and the management of speaker and audience anxiety.

Assess the effectiveness of different communication technologies in the workplace, including their advantages and limitations.

Comprehend strategies for managing public speaking and workplace anxiety.

Distinguish between observation and inference in communication to avoid confusion and misunderstandings.

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Definitions:

Foreign Travel

The activity of traveling outside one's home country for leisure, business, or other purposes.

Quantity Demanded

The amount of a good or service consumers are willing and able to purchase at a given price.

Price Elasticity

A gauge of the reaction in the quantity of a good sought after to adjustments in its price level.

Quantity Demanded

The specific amount of a product that consumers are willing and able to buy at a certain price at a given time.