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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Definitions:

Rawlsian Justice

A theory of justice developed by John Rawls that emphasizes equal basic rights, equality of opportunity, and the promotion of the interests of the least advantaged members of society.

Social Contract

A theory or model that explains the origin of society and government as an implicit agreement among individuals to ensure collective security and welfare.

Distributional Justice

The ethical consideration of the fairness in the spread of wealth, income, and resources among all members of society.

Rawlsian Justice

A theory of justice that emphasizes fairness and equality, proposing that social and economic inequalities should be arranged to benefit the least advantaged members of society.