Forbidden Fruit Extracts Expects Its Earnings Before Interest and Taxes

question 7

Multiple Choice

Forbidden Fruit Extracts expects its earnings before interest and taxes to be $287,600 a year forever.Currently,the firm has no debt.The cost of equity is 15.4 percent and the tax rate is 34 percent.The company is in the process of issuing $3 million of bonds at par that carry an annual coupon rate of 7.6 percent.What is the unlevered value of the firm?

• A)$1,371,429
• B)$1,331,971
• C)$1,107,405
• D)$969,325
• E)$1,232,571

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