Schultz Security Inc

question 20

Multiple Choice

Schultz Security Inc.is an all equity firm.At the end of the current year,the CFO expects EBIT to be $6M,and the same earnings are expected annually in perpetuity.The company is not growing,so CAPEX and investments in net working capital are zero.Schultz's shareholders require a return of 12%.Schultz has 10 million shares outstanding.The corporate tax rate is 40%.What is the market value of Schultz's shares?

• A) $0.72
• B) $2.0
• C) $3.0
• D) $4.0
• E) $5.0

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Definitions:

Reputation Observation

The process of monitoring and assessing the perception of an entity's character or standing among its peers or in society.

Direct Behavioral Observation

A method of assessing individuals by directly watching their behaviors in natural or structured settings.

Narcissism

A personality characteristic involving arrogance, self-centeredness, and a lack of empathy for others.

Acquaintanceship Effect

A phenomenon that suggests the more people know each other, the more they will like each other.