Exhibit 17.1 Eccles Inc., a Zero Growth Firm, Has an Expected EBIT

Exhibit 17.1
Eccles Inc., a zero growth firm, has an expected EBIT of $100,000 and a corporate tax rate of 30%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%.
-Refer to Exhibit 17.1.What is the value of the firm according to MM with corporate taxes?

A) $475,875
B) $528,750
C) $587,500
D) $646,250
E) $710,875

Correct Answer:

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