STP Corp. uses no debt. The weighted average cost of capital is 10.4 percent. The current market value of the equity is $18 million and the corporate tax rate is 35 percent. |
What is the EBIT? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567. Round your answer to 2 decimal places. (e.g., 32.16)) |
EBIT | $ |
Current market value of equity=(EBIT(1-tax rate))/WACC
18million=(EBIT(1-0.35))/0.104
18,000,000*0.104=EBIT*0.65
EBIT=1872000/0.65
which is equal to
=$2,880,000.
STP Corp. uses no debt. The weighted average cost of capital is 10.4 percent. The current...
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