Exhibit 17.2 Kitto Electronics Has an EBIT of $200,000, a Growth Rate

question 3

Multiple Choice

Exhibit 17.2
Kitto Electronics has an EBIT of $200,000, a growth rate of 6%, and its tax rate is 40%. In order to support growth, Kitto must reinvest 20% of its EBIT in net operating assets. Kitto has $300,000 in 8% debt outstanding, and a similar company with no debt has a cost of equity of 11%.
-Refer to Exhibit 17.2.According to the MM extension with growth,what is Kitto's value of equity?

• A)$1,492,000
• B)$1,529,300
• C)$1,567,533
• D)$1,606,721
• E)$1,646,889

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