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Question
Kitto Electronics DataKitto Electronics has an EBIT of $200,000, a growth rate of 6%, and its tax rate is 40%. In order to support growth, Kitto must reinvest 20% of its EBIT in net operating assets. Kitto has $300,000 in 8% debt outstanding, and a similar company with no debt has a cost of equity of 11%.
Refer to data for Kitto Electronics. According to the compressed adjusted present value model, what is Kitto's unlevered value?
a. $1,296,000
b. $1,440,000
c. $1,600,000
d. $1,760,000
e. $1,936,000
Answer
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