Scott's Leisure Time Sports Is an Unlevered fiRm with an After-Tax

question 95

Multiple Choice

Scott's Leisure Time Sports is an unlevered firm with an after-tax net income of $86,000. The unlevered cost of capital is 10% and the tax rate is 34%. What is the value of this firm?

• A) $567,600
• B) $781,818
• C) $860,000
• D) $946,000
• E) $1,152,400

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Definitions:

Salvage Value

The anticipated final value of an asset after concluding its operational life.

Depreciation Expense

An accounting method that allocates the cost of a tangible asset over its useful life, reflecting how much of the asset's value has been used up over a period.

Estimated Useful Life

The expected period over which an asset is anticipated to be usable by a company.

Obsolescence

The process of an asset, product, or technology becoming outdated or no longer used, often due to advancements in technology or changes in consumer preferences.