Packman Corporation Has a Reported EBIT of $500, Which Is

question 5

Multiple Choice

Packman Corporation has a reported EBIT of $500, which is expected to remain constant in perpetuity. The firm borrows $2,000, and its coupon rate is 8%. If the company's marginal tax rate is 30% and its average tax rate is 20%, what are its after-tax earnings?

• A) $238
• B) $272
• C) $259
• D) None of the above

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Definitions:

Franchiser

The company that sells a franchise.