The Lanoi Company Has EBIT of $30,000 and Market Value

question 60

Multiple Choice

The Lanoi Company has EBIT of $30,000 and market value debt of $150,000 outstanding with an 8% coupon rate. The cost of equity for an all equity firm would be 12%. Aggie has a 30% corporate tax rate. Investors face a 20% tax rate on debt receipts and a 12% rate on equity. Determine the value of Aggie.

• A) $130,500
• B) $142,698
• C) $248,537
• D) $209,500
• E) $332,143

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Definitions:

Standard Deviation

A metric indicating the extent to which data points diverge from the mean, showing the distribution's spread.

Average Annual Revenue

The mean income generated by a business, entity, or asset within one fiscal year.

Random Sample

A group of people selected from a bigger group, with every person having the same probability of being chosen.

Standard Deviation

A statistical tool that measures the extent of variation or scattering of values in a dataset, pointing out how much the data varies from the mean.