Once Bitten Corp. uses no debt. The weighted average cost of capital is 9.8 perc

Question

Once Bitten Corp. uses no debt. The weighted average cost of capital is 9.8 percent. If the current market value of the equity is $29 million and there are no taxes, what is EBIT? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.)

Once Bitten Corp. uses no debt. The weighted average cost of capital is 9.8 percent. If the current market value of the equity is $29 million and there are no taxes, what is EBIT? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.)

Explanation / Answer

Calculation of EBIT:

Net income = current market value*weighted average cost of capital

= 29*0.098= 2.842 million

Since the company is not paying tax and interest so the net income is equal to EBIT.

Therefore, EBIT= 2.842 million

EBIT= $2,842,000

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