the following inputs, compute the theoretical value-to-EBITA ratio: tax rate- 34

Question

the following inputs, compute the theoretical value-to-EBITA ratio: tax rate- 34%, growth rate5%, ROWC- 12%, and c) 12.8x d) 17.0× 24. A firm has $600 market value of and $50 in excess cash. If the firm's expected EBITA is $100, what is the enterprise value-to- a) 7.5x b) 9.0 cj 11.0× d) 6.9x equity and $300 market value of debt. The firm also has $100 in nonconsolidated subsidiaries EBITA ratio? Answer 25. When considering the optimal structure for a firm, the management should consider the following EXCEPT A) That the choice of capital structure doesn't matter since it has no impact on the value of the firm. B) That they should weigh the tax benefit of debt financing against the risk and cost of financial distress C) That many companies have capital structures that would give them a debt rating of 888- to At D) That it is important that a company's capital structure does not restrict the company's ablility to pursue attra investment opportunities Answer or a "-" if it decrea 26. Given the following list, put a "+" if the item increases a firm's common equity value the firm's common equity. (6 points) Excess real estate Preferred stock Non-controlling or minority interest Tax loss carryforward Unfunded pension liabilities Nonconsolidated subsidiaries

Explanation / Answer

Question no:23 Answer is option (C ) 12.8 X Value/EBIT   = [(1- Tax rate) * (1-        g/roc)]/(WACC - g) Tax rate =34% =0.34 g=5% , WACC=8% , ROC =12% g/roc = 5%/12% =0.4167 WACC - g =8%-5% =3% =0.03 Vale / EBIT = [(1-034) *(1 - 0.4167)] /0.03 =0.66*0.5833 /0.03 =12.83 times Question no:24 Answer is option (b)   "9 X" value to EBITA ratio = (market Value of Equity + market value of Debt ) / EBITA value to EBITA =($600+$300)/$100 =9 Times Question no:25 Answer is option (a) " that the choice of capital Structure doesn't matter Since it has no impact on the value of the firm the capital Structure of business (Choice of capital Structure ) should be in the way that it maximise the firm value.

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