Practice problem help pls
Broomstick Builders, an all-equity financed firm, has a current market value of equity of $18.5 million. It has a weighted average cost of capital of 8.1 percent and a tax rate of 21 percent. What is the company’s EBIT? Use the framework in Modigliani and Miller Proposition I with corporate taxes and without costs of financial distress to answer this question.
a.
$1.50 million
b.
$2.04 million
c.
$1.90 million
d.
$1.75 million
e.
$3.10 million