Scott's Leisure Time Sports is an unlevered ﬁrm with an after-tax net income of $86,000. The unlevered cost of capital is 10% and the tax rate is 34%. What is the value of this ﬁrm?
A) $567,600
B) $781,818
C) $860,000
D) $946,000
E) $1,152,400

Question

Quizplus · Accepted Answer

The value of an unlevered firm is calculated by dividing the after-tax net income by the unlevered cost of capital. Here, $86,000 / 0.10 = $860,000.

Scott's Leisure Time Sports Is an Unlevered ﬁRm with an After-Tax