The Aggie Company Has EBIT of $50,000 and Market Value

question 72

Multiple Choice

The Aggie Company has EBIT of $50,000 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) $332,143

---

Definitions:

Femoral

Pertaining to the femur or the thigh region.

Pudendal

Related to the pudendal nerve, which supplies areas such as the external genitalia and the skin around the anus and perineum.

Musculocutaneous

Relating to both muscles and the skin, or a nerve in the arm that innervates the front muscles of the upper arm and the skin of the forearm.

Radial

Pertaining to structures spreading out in all directions from a central point or axis.