Back Woods Coffee Has Expected Earnings Before Interest and Taxes

question 27

Multiple Choice

Back Woods Coffee has expected earnings before interest and taxes of $34,500, an unlevered cost of capital of 14%, and debt with both a book and face value of $20,000. The debt has an annual 7%
Coupon. The tax rate is 35%. What is the value of the firm?

• A) $167,179
• B) $174,015
• C) $177,778
• D) $203,518
• E) $241,414

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Definitions:

Actual Hours

The real number of hours worked or spent on a specific task or project, as opposed to planned or estimated hours.

Direct Labour Rate Variance

The difference between the actual wages paid to workers and the standard cost of those wages for the actual hours worked.

Labour Efficiency Variance

A metric used to measure the difference between the actual hours worked and the standard hours expected to complete a task.

Standard Rate (SR)

Standard Rate (SR) refers to a predefined or established cost or value used in financial and operational calculations, often applied in budgeting and cost accounting.