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

question 8

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 Gomez's value of equity?

• A) $1,492,000
• B) $1,529,300
• C) $1,567,533
• D) $1,606,721
• E) $1,646,889

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