Discrete Discs Inc manufactures hard disk drives for personal computers. Discrete 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. The cost of equity for Discrete is 8%. Solid State Storage Inc is identical to Discrete except that it has $3M of long term debt outstanding. What is the value of Solid State's equity? The corporate tax rate is 30%.
A) $84.5M
B) $85.4M
C) $87.5M
D) $88.4M
E) $122.9M
B
Business
You might also like to view...
Which one of these is not included in Maslow's Hierarchy of Needs?
A. Self-actualization needs B. Safety needs C. Interactive needs D. Esteem Needs
Business
A company seeking to build brand awareness through repeated exposures of the same ads is using the concept of high:
A) frequency B) continuity C) exposure D) reach
Business