The Coffee Shop Has Expected Earnings Before Interest and Taxes

question 366

Multiple Choice

The Coffee Shop has expected earnings before interest and taxes of $14,600, an unlevered cost of capital of 12%, and debt with both a book and face value of $18,000. The debt has an annual 8.25%
Coupon. The tax rate is 35%. What is the value of the firm?

• A) $81,640
• B) $85,383
• C) $87,778
• D) $90,114
• E) $92,309

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Definitions:

Grading System

An evaluation method used in educational settings to measure and communicate students' academic performance through assigned grades, often ranging from letters A through F or numerical scales.

Problem-Solving Ability

The capacity to identify solutions to complex or simple issues or to engage in a process to resolve unknowns.

Representative Sample

A sample that mirrors the population of interest; it includes important subgroups in the same proportions as they are found in that population.

Selective Sample

A subset of a population chosen for a study because it represents a larger group on some criteria, but it might not fully represent the entire population due to the selection process.