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Pelamed Pharmaceuticals has EBIT of $ 322 million in 2006. In​ addition, Pelamed has interest expenses of $ 125 million...

Pelamed Pharmaceuticals has EBIT of $ 322 million in 2006. In​ addition, Pelamed has interest expenses of $ 125 million and a corporate tax rate of 21 %.

a. What is​ Pelamed's 2006 net​ income?

b. What is the total of​ Pelamed's 2006 net income plus interest​ payments?

c. If Pelamed had no interest​ expenses, what would its 2006 net income​ be? How does it compare to your answer in part​(b​)?

d. What is the amount of​ Pelamed's interest tax shield in​ 2006?

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Answer #1

a.

What is​ Pelamed's 2006 net​ income

=EBIT − Interest − Taxes

=(322-125)*(1-21%)

=155.63 million

b.What is the total of​ Pelamed's 2006 net income plus interest​ payments

=155.63+125

=280.63 million

c.

what would its 2006 net income​ be=322*(1-21%)=254.38 million

lower than part b by=280.63-254.38=26.25 million

d.

What is the amount of​ Pelamed's interest tax shield in​2006

=125*21%=26.25 million

the above is answer..

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