Question
Haricot Corp. and Pinto Corp. both have operating profits of $155 million. Haricot is financed solely by equity, while Pinto has issued $205 million of
Haricot Corp. and Pinto Corp. both have operating profits of $155 million. Haricot is financed solely by equity, while Pinto has issued $205 million of 8% debt. If the corporate tax rate is 21%: Required:
a. How much tax does each company pay?
b. What is the total payout to investors (debtholders plus shareholders) of each company?
How much tax does each company pay? (Enter your answers in million rounded to 1 decimal place.
A.
Haricot: $32550000
Pinto:
What is the total payout to investors (debtholders plus shareholders) of each company? (Enter your answers in million rounded to 1 decimal place.
B
Haricot Pinto
Return to debtholders 0
Return to shareholders
Total return to investors
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Entrepreneurial Finance
Authors: Denise Lee
1st Edition
1948426129, 9781948426121
