Clam Shack is a seafood company based in Wellington. It currently has debt with a market value of $100,000. The company has a WACC of 9 percent and has EBIT of $9,000 in the next year. The tax rate is 20%. What is the growth rate of EBIT if the debt-value ratio is 50%? 7.2% 5.4% 8.4% 8.5%

Clam Shack is a seafood company based in Wellington. It currently has debt with a market value of $100,000. The company has a WACC of 9 percent and has EBIT of $9,000 in the next year. The tax rate is 20%. What is the growth rate of EBIT if the debt-value ratio is 50%? 7.2% 5.4% 8.4% 8.5%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 28P

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Concept explainers

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.

Question

Clam Shack is a seafood company based in Wellington. It currently has debt with a market value of $100,000. The company has a WACC of 9 percent and has EBIT of
$9,000 in the next year. The tax rate is 20%. What is the growth rate of EBIT if the debt-value ratio is 50%?
7.2%
5.4%
8.4%
8.5%

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