Gomez Computer Systems Has an EBIT of $200,000, a Growth

question 16

Multiple Choice

Gomez computer systems has an EBIT of $200,000, a growth rate of 6%, and its tax rate is 40%. In order to support growth, Gomez must reinvest 20% of its EBIT in net operating assets. Gomez has $300,000 in 8% debt outstanding, and a similar company with no debt has a cost of equity of 11%.
-According to the MM extension with growth, what is the value of Gomez's tax shield?

• A) $156,385
• B) $164,616
• C) $173,280
• D) $182,400
• E) $192,000

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Definitions:

Anesthesia

The practice of using drugs to prevent pain during surgery, which can result in loss of awareness or consciousness.

Prenatal Care

Health services and support provided to expectant mothers throughout pregnancy to ensure the health of both the mother and the developing fetus.

Pregnancy

The condition of carrying one or more offspring within the womb, typically lasting around 40 weeks from the last menstrual period to childbirth.

Maternal Mortality Rate

A measure of the number of deaths of women due to pregnancy-related causes per 100,000 live births in a given year or place.