The Aggie Company Has EBIT of $70,000 and Market Value

question 69

Multiple Choice

The Aggie Company has EBIT of $70,000 and market value debt of $100,000 outstanding with a 9% coupon rate. The cost of equity for an all equity firm would be 14%. Aggie has a 35% corporate tax rate. Investors face a 20% tax rate on debt receipts and a 15% rate on equity. Determine the value of Aggie.

• A) $120,000
• B) $162,948
• C) $258,537
• D) $263,080
• E) $355,938

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