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:

Quadratic Equation

A polynomial equation of the second degree, typically presented in the form ax^2 + bx + c = 0, where a, b, and c are constants.

Factoring

The process of breaking down an expression into simpler terms that, when multiplied together, produce the original expression.

Square Root Property

The square root property states that if \(x^2 = a\), then \(x = \pm\sqrt{a}\), assuming \(a\) is non-negative.

Complex Solutions

Solutions to equations that involve complex numbers, which include a real component and an imaginary component.