Pelamed Pharmaceuticals had EBIT of $325 million in 2006, interest expenses of $125 million, and a corporate

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Pelamed Pharmaceuticals had EBIT of $325 million in 2006, interest expenses of $125 million, and a corporate tax rate of 40%.

a. What was Pelamed’s 2006 net income?

b. What was the total of Pelamed’s 2006 net income and interest payments?

c. If Pelamed had no interest expenses, what would its 2006 net income have been? How does it compare to your answer in part (b)?

d. What was the amount of Pelamed’s interest tax shield in 2006?

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Fundamentals of Corporate Finance

ISBN: 978-0321818171

2nd Canadian edition

Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford

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Question Posted: Jan 05, 2019 12:50 PM

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Pelamed Pharmaceuticals had EBIT of $325 million in 2006, interest expenses of $125 million, and a corporate

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Fundamentals of Corporate Finance

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