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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