What amount comes closest to the amount of interest

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Reference no: EM131985381

Sinclair, Inc. is a levered firm with assets valued at $10,000 and has debt issued at 10% interest. Sinclair pays tax at the rate of 34%.

The firm faces EBIT scenarios of recession and boom. {Note: EBIT = earnings before interest and tax, $ Interest = dollar amount of interest owed on the debt, NIBT = net income before tax, NI = net income, EPS = earnings per share}.

Assume that firms with zero or negative NIBT pay zero taxes.

	EBIT	$ Interest	NIBT	TAXES	NI	EPS
Boom	$900					$1.32
Recession	$200		-$550

What amount comes closest to the amount of interest that Sinclair must pay in the BOOM scenario?

a. $60

b. $99

c. $66

d. $90

e. $51

Reference no: EM131985381

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