Question

Question 27 10 points Save Ans Consider the following income statements for a firm with (left column) and without leverage (right column) What is the difference in dollars between the total amount available to all investors (both equity holders and debt holders) in the levered case (left) and the total amount available to all investors in the unlevered case (right)? Instruction: Type ONLY your numerical answer in the unit of dollars, NO $ sign, NO comma sign, and round it to the nearest integer 2019 levered 2019 Year unlevered S3,000 EBIT S3,000 Interest expense $300 0 Earnings before tax Taxes (35%) Net Income

Answer 1

YEAR	2019 Levered	2019 Unlevered
EBIT	$3,000	$3,000
Interest expense	($300)	$0
Earnings before tax	$2,700	$3,000
Taxes (35%)	($945)	($1,050)
Net Income	$1,755	$1,950

In case of Levered firm, Total amount available to both equity and debt holders = $1,755

In case of Unlevered firm, Total amount available to equity holders = $1,950