Question

Scarlett Corp. uses no debt. The weighted average cost of capital is 8.4 percent. If the current market value of the equity is $25 million and there are no taxes, what is EBIT?

Answer 1

Answer:

EBIT $2,100,000

Explanation:

WACC=EBIT/(V+D)

8.4%=EBIT/$25,000,000

EBIT=25,000,000*8.4%

EBIT=$2,100,000