Eccles Inc

question 40

Multiple Choice

Eccles Inc., a zero growth firm, has an expected EBIT of $100,000 and a corporate tax rate of 30%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%.
-Refer to the data for Eccles Inc.What is the value of the firm according to MM with corporate taxes?

• A) $475,875
• B) $528,750
• C) $587,500
• D) $646,250
• E) $710,875

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Definitions:

Statutory Period

A time frame defined by law during which certain actions can be taken, such as the filing of lawsuits or the enforcement of rights.

Emancipated

Emancipated describes a minor who has been legally granted the rights and responsibilities of an adult, typically freeing them from parental control and allowing them to make their own legal decisions.

Reaffirmation

An agreement made by a bankruptcy debtor to continue paying a dischargeable debt after the bankruptcy, usually in order to keep collateral or mortgaged property.

Cosign

To sign a legal document alongside another person, often agreeing to share the responsibility for fulfilling the terms of the document, such as repaying a loan.