Scooby Snacks Inc is an all equity firm. At the end of the current year, the CFO expects EBIT to be $5M 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 Scooby Snacks Inc is 14%. Scooby's prime competitor is a company called Shaggy Treats Inc Shaggy Treats is identical to Scooby Snacks in every respect except that Shaggy Treats has $2.5M of long term debt outstanding. What is the value of Shaggy Treats' equity? The corporate tax rate is 30%.
A) $22.5M
B) $23.0M
C) $23.25M
D) $25M
E) $25.75M
C
Business
You might also like to view...
Mudarabah and the murabaha are:
A. Islamic banking methods. B. Arabic words for interest and profit, respectively. C. banking practices that are prohibited by Islam. D. laws governing international trade and commerce in Islamic countries. E. laws limiting the right to private property.
Business
How are children protected from certain television broadcasts?
What will be an ideal response?
Business