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:

Dairy Products

Food products made from milk, including cheese, yogurt, and butter.

Safe Food Handling

Practices aimed at preventing foodborne illnesses by properly preparing and storing food.

Foodborne Illness

Illness caused by consuming contaminated food or beverages, often involving bacteria, viruses, or parasites.

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A dietary approach designed to help treat or prevent high blood pressure, emphasizing fruits, vegetables, whole grains, and lean proteins.