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Suppose that Banana Computers has $1,000 in revenue this year, along with COGS of $400 and SG&A of $100. The required rate of return on its equity is 14%, and the risk-free rate is 5%. Assume that the COGS only include the marginal costs of selling a computer. Banana is considering adding $700 worth of debt with a coupon rate of 5% and an YTM of 7.9% to its capital structure. What is the net income of Banana without and with the debt?
Vigor
Physical strength, good health, or energy often exhibited through robust activity.
Nomothetic
Refers to the approach in psychology that aims to study what we share with others, focusing on general laws or principles that apply to all people.
Mechanistic
A view or theory that regards complex processes as being governed by simple physical or chemical principles, often compared to the workings of a machine.
Cognitive
Related to the processes of thinking, understanding, learning, and remembering.
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