RoTek Has a Capital Structure of $300,000 in Equity and $300,000

question 13

Multiple Choice

RoTek has a capital structure of $300,000 in equity and $300,000 in perpetual debt.The firm's cost of equity is 14 percent and its cost of debt is 9 percent.If the firm has an expected, perpetual net operating income of $120,000 and a marginal tax rate of 40 percent, what is the market value of RoTek? Assume all net income is paid out as dividends.

• A)$698,571
• B)$814,286
• C)$818,571
• D)$55,800

---

Definitions:

Side-Tracker

A factor or behavior that diverts or distracts focus from the main issue or task at hand.

Negative Behaviors

Actions or conduct that are detrimental to oneself or others.

Facilitator

A person who makes an action or process easy or easier, often guiding groups in discussions or activities.

Inhibits Creativity

Refers to factors or conditions that negatively affect or constrain one's ability to generate innovative ideas or solutions.