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:

Yearly Pension

The annual amount paid to a retired employee, typically funded by previous contributions from the employer and/or the employee.

Formulas

Predefined mathematical equations used to calculate values based on input data, widely used in disciplines such as finance, physics, and chemistry.

Royalty

Money that employees or others receive based on sales, for example an author or musician.

Percentage

A mathematical concept that represents a portion of 100, used in describing proportions and rates in various contexts.