Janus International Is an All-Equity Company

question 48

Multiple Choice

Janus International is an all-equity company.You are given the following information for Janus International:
EBIT = $880 000 forever
Corporate tax rate = 25%
Cost of equity = 12%
The company is in the process of issuing $1 000 000 of bonds at par that carry a 11.50% annual coupon.What is the levered value of the firm?

• A)$8 000 000
• B)$5 528 750
• C)$5 750 000
• D)$9 800 000
• E)$6 655 250

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Definitions:

Adjusted Trial Balance

A list of all accounts and their balances after adjustments have been made for errors, accruals, and deferrals, used to prepare financial statements.

Income Statement

A report detailing a business's income, expenditures, and net earnings or losses for a given time frame.

Adjusted Trial Balance

is a list of all accounts and their balances after making adjustments, used to verify the equality of debits and credits.

Net Income

The income a company retains following the subtraction of all costs and taxes from its total revenue.