Emma Incorporated Has EBIT of $875,000 for the Current Year

question 47

Multiple Choice

Emma Incorporated has EBIT of $875,000 for the current year.The firm has $350,000 of debt outstanding with a coupon rate of 7 percent.Investors require a return of 15 percent on the firm,and the firm has a corporate tax rate of 40%.What is the present value of the firm's tax shields?

• A) $ 24,500
• B) $350,000
• C) $140,000
• D) $ 52,500

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Definitions:

Peripheral Protein

Proteins that are located on the outer surfaces of the lipid bilayer of cell membranes, not embedded within the lipid layer but often attached to integral proteins.

Protein Synthesis

The process by which cells produce proteins by decoding the information contained within genes.

ATP Synthesis

The process by which cells produce adenosine triphosphate (ATP), a molecule that stores and transports chemical energy within cells.

Contains DNA

This term refers to cells or structures that house deoxyribonucleic acid (DNA), the hereditary material containing the instructions used in the growth, development, functioning, and reproduction of all known living organisms and many viruses.