Klearcut Forestry Inc generates perpetual annual EBIT of $100 million. Assume that the EBIT, and all other cash flows, occur at year end and that we are currently at the beginning of a year
Assume that all of the perfect market M&M assumptions hold and that the corporate tax rate is 35%. The CFO of Klearcut is trying to determine the company's optimal capital structure. Which of the debt-to-equity ratios listed below will maximize Klearcut's value?
A) D/E = 0.5
B) D/E = 1.0
C) D/E = 1.5
D) D/E = 2.0
E) D/E = 2.5
E
You might also like to view...
How should you conclude each interview with an expert?
Inform the expert that you will be calling him or her later to verify points. Express your appreciation and ask for permission to telephone later to verify points. Ask a lot of open-ended questions in the last five minutes.
Probing questions help you to uncover and clarify the prospect's buying problem and the circumstances surrounding the problem
Indicate whether the statement is true or false