Question

a company earns perpetual annual cash flows, and uses no debt. the company's weighted average cost of capital is 10.0 percent. if the current market value of the equity is $12 million and there are no taxes, what is ebit? [express your answer rounded to the closest dollar with no commas (e.g. 650000)]

Answer 1

The EBIT can be calculated using the formula: EBIT = Equity / Weighted Average Cost of Capital. Given a current market value of equity of $12 million and a weighted average cost of capital of 10.0 percent, the EBIT is $120 million.

Step-by-step explanation:

The EBIT (Earnings Before Interest and Taxes) can be calculated using the formula:

EBIT = Equity / Weighted Average Cost of Capital

Given that the current market value of the equity is $12 million and the weighted average cost of capital is 10.0 percent, the EBIT would be:

EBIT = $12 million / 0.10 = $120 million

Therefore, the EBIT is $120 million.