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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. Using the compressed adjusted present value model, what is the value of Kitto's tax shield?
a. $156,385
b. $164,616
c. $173,280
d. $182,400
e. $192,000
Answer
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