New Schools,Inc

question 51

Multiple Choice

New Schools,Inc.expects an EBIT of $7,000 every year forever.The firm currently has no debt,and its cost of equity is 15 percent.The firm can borrow at 8 percent and the corporate tax rate is 34 percent.What will the value of the firm be if it converts to 50 percent debt?

• A)$31,796.47
• B)$36,036.00
• C)$37,407.16
• D)$37,552.08
• E)$38,119.30

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Definitions:

Brake Fluid

Brake fluid is a type of hydraulic fluid used in brake and hydraulic clutch systems in vehicles, responsible for transferring force into pressure to stop the vehicle.

Pressure Differential Valve

Also known as brake warning light; used in hydraulic brake systems to indicate to the driver when one-half (primary or secondary circuit) of the system is not functioning. Consists of a cylinder inside of which is a spool valve.

Hydraulic Brake Circuit

A system in vehicles that uses pressurized hydraulic fluid to transfer force from the brake pedal to the brake mechanism at the wheels.

Mechanical Failure

The breakdown or malfunction of a mechanical system or component due to wear and tear, improper maintenance, or defect.