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Alpha Corporation has earnings before interest and tax (EBIT) per annum in perpetuity of $200,000. The tax rate is 30%. The firm is funded $50,000

Alpha Corporation has earnings before interest and tax (EBIT) per annum in perpetuity of $200,000. The tax rate is 30%. The firm is funded $50,000 of debt and $150,000 of equity. The cost of equity is 18% and the cost of debt is 6%. Given the information above, what is the appropriate discount rate if earnings after interest and before tax (EAIBT)is used to calculate the equity value of the firm?

A.

20.79%

B.

25.71%

C.

18%

D.

14.55%

E.

None of the above

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