Houston Tools Has Expected Earnings Before Interest and Taxes of $189,400,an

question 12

Multiple Choice

Houston Tools has expected earnings before interest and taxes of $189,400,an unlevered cost of capital of 12.87 percent,and a tax rate of 34 percent.The company has $318,000 of debt that carries a coupon rate of 6.2 percent.The debt is selling at par value.What is the value of this firm?

• A)$996,758.89
• B)$1,079,402.05
• C)$978,758.89
• D)$1,113,758.89
• E)$1,036,758.89

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Definitions:

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Marketing Mix

The collection of decisions regarding product, place, price, and promotion that companies make during the process of bringing a product or service to market.

Standardized Marketing

A marketing strategy that uses uniform campaigns and messages across different markets and regions, often utilized by global brands.

Political Structures

The organizational framework of a government, detailing how power is distributed (e.g., federal vs. unitary structure) and the branches of government (e.g., executive, legislative, judiciary).