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What is ?rm 2018 net income

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Reference no: EM133059892

You are the CEO of a manufactory ?rm based in the Country of Eldorado. Suppose the corporate tax rate in Eldorado is 30%, your company Earnings before Interest and Taxes (EBIT) is £450million in 2018 and you have interest expenses of £125million.

a. What is your ?rm's 2018 net income?

b. What is the sum of your firm's 2018 net income and interest payments?

c. Assume now your ?rm had no interest expenses, what would its 2018 net income be? Compare the result with your answer in part b.

d. Calculate your firm's interest tax shield in 2018.

e. "The total value of the unlevered firm exceeds the value of the ?rm with leverage due to the present value of the tax savings from debt. Is this statement true or false? Explain.

Reference no: EM133059892

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