Calculation of capital budgetinga company has the following

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Calculation of Capital Budgeting.

A company has the following income statement. What is its net operating profit after taxes (NOPAT)?

Sales

$1,000

Costs

600

Depreciation

250

BIT

$150

Interest expense

50

EBT

$100

Taxes (40%)

40

Net income

$60

a. $ 60
b. $ 80
c. $ 90
d. $100
e. $120

Mantle Corporation is considering two equally risky investments:
1) A $5,000 investment in preferred stock which yields 7 percent.
2) A$5,000 investment in a corporate bond which yields 10 percent.

What is the break-even corporate tax rate which makes the company indifferent between the two investments?

a. 33.17%
b. 34.00%
c. 37.97%
d. 42.15%
e. 42.86%

Reference no: EM13356081

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