KAHR Incorporated Will Have EBIT This Coming Year of $45

question 80

Essay

KAHR Incorporated will have EBIT this coming year of $45 million.It will also spend $18 million on total capital expenditures and increases in net working capital,and have $9 million in depreciation expenses.KAHR is currently an all-equity firm with a corporate tax rate of 35% and a cost of capital of 10%.If the interest rate on new KAHR debt is 8%,how much should KAHR borrow today if they want to maximize there interest tax shield?

---

Definitions:

Contract Acquisition

The process of obtaining a contract through various means such as negotiation, competitive bidding, or purchase in order to procure goods, services, or works.

Old-Timer Resistance

The reluctance or opposition often exhibited by long-standing members within an organization to changes or new ideas.

Newcomer

A Newcomer is an individual who has recently joined an organization, group, or community, and is in the process of learning and adjusting to its norms and practices.

Temporary Employee

A worker hired for a predetermined, limited period of time or for the duration of a specific project or task.