PDQ, Inc., expects EBIT to be approximately $13.2 million per year for the fores

Question

PDQ, Inc., expects EBIT to be approximately $13.2 million per year for the foreseeable future, and it has 50,000 20-year, 8 percent annual coupon bonds outstanding. (Use Table 11.1)

What would the appropriate tax rate be for use in the calculation of the debt component of PDQ’s WACC? (Round your answer to 2 decimal places.)

PDQ, Inc., expects EBIT to be approximately $13.2 million per year for the foreseeable future, and it has 50,000 20-year, 8 percent annual coupon bonds outstanding. (Use Table 11.1)

Explanation / Answer

table 11.1

Income Tax Rate

10,000,001- 15,000,000 35%

335,001-10,000,000 34%

100,001-335,000 39%

75,001-100,000 34%

50,001-75,000 25%

0-50,000 15%

Company operating income is 1320000 which will fall under the category of income range of 335001- 10000000 at which income tax rate is 34% so to caluclate Debt content of WACC, tax rate of 34% would be used for after tax cost of debt.

table 11.1

Income Tax Rate

10,000,001- 15,000,000 35%

335,001-10,000,000 34%

100,001-335,000 39%

75,001-100,000 34%

50,001-75,000 25%

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.