Question

Scarlett Corp. uses no debt. The weighted average cost of capital is 9.8 percent. If the current market value of the equity is $29 million and there are no taxes, 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 the nearest whole number, e.g., 32.)

EBIT $

Answer 1

yes

Step-by-step explanation:

Answer 2

EBIT = $2,842,000

Step-by-step explanation:

The computation of the Earning before income and taxes (EBIT) is shown below:

= Current market value of the equity × weighted average cost of capital

= $29,000,000 × 9.8%

= $2,842,000

Since there is no information is given for the debt so we consider the Equity only

Simply we multiply the current market value of the equity with the weighted average cost of capital to find out the EBIT