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Gunnar Corp. uses no debt. The weighted average cost of capital is 5 percent. If the...

Gunnar Corp. uses no debt. The weighted average cost of capital is 5 percent. If the current market value of the equity is $16 million and there are no taxes, what is EBIT?

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Answer #1

Value of an unlevered firm = EBIT / WACC

$16,000,000 = EBIT / 0.05

EBIT = $800,000

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