The Winter Wear Company Has Expected Earnings Before Interest and Taxes

question 72

Multiple Choice

The Winter Wear Company has expected earnings before interest and taxes of $3,800,an unlevered cost of capital of 15.4 percent and a tax rate of 22 percent.The company also has $2,600 of debt with a coupon rate of 5.7 percent.The debt is selling at par value.What is the value of this firm?

• A)$15,585
• B)$19,819
• C)$12,115
• D)$12,055
• E)$17,700

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Definitions:

Correlation

A statistical measure that represents the extent to which two or more variables fluctuate together.

Causal Explanations

Statements or analysis that identify reasons or causes for certain phenomena.

Slippery Slope Fallacy

A logical fallacy that assumes a relatively small first step leads to a chain of related events culminating in some significant effect.

Warranted Arguments

Arguments that are justified or backed up by substantial evidence or reason.