Codswallop Disposal Inc is an all equity firm. At the end of the current year, the CFO expects EBIT to be $10M, and the same earnings are expected annually in perpetuity
The company is not growing, so CAPEX and investments in net working capital are zero. Codswallop's shareholders require a return of 8%. Codswallop has 20 million shares outstanding. The corporate tax rate is 30%. What is the market value of Codswallop's shares?
A) $0.44
B) $4.38
C) $6.25
D) $8.75
E) $3.84
B
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