Question No 7:
Company T is a listed company in the retail sector. Its current profit before interest and taxation is $5 million. This level of profit is forecast to be maintainable in future. Company T has a 10% corporate bond in issue with a nominal value of $10 million. This currently trades at 90% of its nominal value.
Corporate tax is paid at 20%. The following information is available: Which of the following is a reasonable expectation of the equity value in the event of an attempted takeover?
A. $32.0 million
B. $41.6 million
C. $65.0 million
D. $50.2 million
Answer: B
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