The Addopa Co

question 333

Multiple Choice

The Addopa Co. has a projected annual EBIT of $5,000. The company is currently 100% equity financed with a cost of equity of 14%. The tax rate is 34% and the cost of debt is 10%. What is the
Value of the firm if they borrow $12,000?

• A) $23,571
• B) $24,771
• C) $26,009
• D) $27,651
• E) $29,229

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Definitions:

Blinking

The rapid closing and opening of the eyelid, which is a reflex action to protect the eye from irritants.

Motor Skills

Abilities required to control the muscles and movements of the body, divided into fine (small movements) and gross (larger movements) motor skills.

Finely Tune

To make very small adjustments to something in order to achieve the best or desired performance.

Motivates

Provides reason or incentive for someone to act or behave in a certain way.