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10 January, 14:37

Scarlett Corp. uses no debt. The weighted average cost of capital is 6.4 percent. The current market value of the equity is $27 million and the corporate tax rate is 35 percent. What is EBIT? (Enter your answer in dollars, not millions of dollars, e. g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16)

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  1. 10 January, 14:40
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    EBIT = 2,658,461.54

    Explanation:

    Assuming the Company fullfil his expected return

    Equity x WACC = Net Income

    27,000,000 x 0.064 = 1,728,000 Net Income

    Net income x (1-tax-rate) + interest = EBIT

    1,728,000 x (1-.35) + 0 = EBIT

    EBIT = 2,658,461.54

    If Scarlett Corp uses no debt, then thre are no interest.
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Home » Business » Scarlett Corp. uses no debt. The weighted average cost of capital is 6.4 percent. The current market value of the equity is $27 million and the corporate tax rate is 35 percent. What is EBIT? (Enter your answer in dollars, not millions of dollars, e.
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