Trudy's Pizza is an unlevered ﬁrm with an after-tax net income of $47,000. The unlevered cost of capital is 7.5% and the tax rate is 35%. What is the value of this ﬁrm?
A) $219,333
B) $328,333
C) $407,334
D) $626,667
E) $733,333

Question

Quizplus · Accepted Answer

The formula to calculate the value of an unlevered firm is VU = NI / ULCC where NI is the after-tax net income and ULCC is the unlevered cost of capital. 
VU = 47,000 / 0.075 = $626,667 
Therefore, the value of the firm is $626,667.

Trudy's Pizza Is an Unlevered ﬁRm with an After-Tax Net