The Boston Firm is unlevered with assets of $30 million and EBIT of $6 million. If the firm's tax rate is 34%, calculate both its after-tax cash flow and its value given a risk adjusted discount rate of 12%.
A) $2,400,000; $30,000,000.
B) $2,400,000; $2,400,000.
C) $3,960,000; $33,000,000.
D) $3,960,000; $30,000,000.
E) $2,400,000; $33,000,000.

Question

Quizplus · Accepted Answer

The after-tax cash flow is $3,960,000 and the value of the firm is $33,000,000.

The Boston Firm Is Unlevered with Assets of $30 Million