What does the calculation in (a) imply about the correct level of debt? 1 answer below »


1. Olbet, Inc., is a nongrowth society in the 35-percent tax grasp. Olbet’s enduring EBIT is $1.2 darling per annum. The attached’s pretax absorb of debit is 8 percent and its curiosity-behalf absorb per year is $200,000. Society analysts admire that the unlevered absorb of Olbet’s equity is 12 percent.

a. What is the esteem of this attached?

b. What does the regard in (a) mean encircling the redress roll of debit?

c. Is the omission redress? Why or why not?