The Globe Incorporated Has EBIT of $20 Million for the Current

question 45

Multiple Choice

The Globe Incorporated has EBIT of $20 million for the current year.On the firm balance sheet,there is $80 million of debt outstanding that carries a coupon rate of 8 percent.Investors seek a return of 12 percent on the firm,and the firm has a corporate tax rate of 40%.What is the value of the firm?

• A) $124,000,000
• B) $128,000,000
• C) $132,000,000
• D) $136,000,000

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Definitions:

Tax Base

The total amount of assets or income that can be taxed by a government, serving as a critical element for determining tax rates and revenue.

Progressive Tax Rate

A tax system in which the rate of taxation increases as the taxable amount increases, applying higher rates to higher income brackets.

Wages

Payment to an employee from an employer for the labor or services performed, typically calculated on an hourly, daily, or piecework basis.

Salaries

Fixed regular payments made by an employer to an employee, typically expressed as an annual sum and taxed as ordinary income.