# fm3 4 - Taxes (40%) 2,000,000 NI \$3,000,000 Interest = EBIT...

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SOLUTIONS TO END-OF-CHAPTER PROBLEMS 3-1 Corporate yield = 9%; T = 35.5% AT yield = 9%(1 - T) = 9%(0.645) = 5.76%. 3-2 Corporate bond yields 8%. Municipal bond yields 6%. %. 25 T 02 . 0 T 08 . 0 06 . 0 T 08 . 0 08 . 0 ) T 1 ( % 6 % 8 ) T 1 ( muni on Yield bond on taxable yield pretax Equivalent = = = = = 3-3 NI = \$3,000,000; EBIT = \$6,000,000; T = 40%; Interest = ? Need to set up an income statement and work from the bottom up. EBIT \$6,000,000 Interest 1,000,000 Answers and Solutions: 3 - 4 EBT \$5,000,000 EBT = 6 . 0 \$3,000,000 T) (1 \$3,000,000 =
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Unformatted text preview: Taxes (40%) 2,000,000 NI \$3,000,000 Interest = EBIT – EBT = \$6,000,000 – \$5,000,000 = \$1,000,000. 3-4 EBITDA = \$7,500,000; NI = \$1,800,000; Int = \$2,000,000; T = 40%; DA = ? EBITDA \$7,500,000 DA 2,500,000 EBITDA – DA = EBIT; DA = EBITDA – EBIT EBIT \$5,000,000 EBIT = EBT + Int = \$3,000,000 + \$2,000,000 Int 2,000,000 (Given) EBT \$3,000,000 6 . 000 , 800 , 1 \$ ) T 1 ( 000 , 800 , 1 \$ = − Taxes (40%) 1,200,000 NI \$1,800,000 (Given)...
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## This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

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