Suppose That Banana Computers Has $1,000 in Revenue This Year

question 40

Multiple Choice

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?

• A) $500 and $484.2
• B) $484.2 and $500
• C) $500 and $465
• D) $490 and $500

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Low Personal Accomplishment

A feeling or condition characterized by a perceived lack of achievement and personal fulfillment in one's work or personal life.

Human Services

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