(Lecture 11 - Capital Budgeting and Valuation with Leverage and Exchange Risk)

Consider the following income statement for the United Supermarket that is currently levered. Its BIT in 2020 is $400 and interest expense is $60 (but displayed as negative 60 in the income statement to indicate that it is

an expense). The firm faces a tax rate of 30%.

Assume that net income can be used to pay out to investors, the total amount available to payout to all the investors (both equity holders and debt holders) is $

The difference in dollars between (1) the total amount available to all investors (both equity holders and debt holders) and (2) the income that would be available to equity holders if the firm were not levered for the year 2020

is $

(That is, what is (1) minus (2)?) Note that we assume the operating performance is unchanged (so same EBIT) if the firm were not levered (i.e., financed with equity only).

Instruction: Type ONLY your numerical answer in the unit of dollars, NO $ sign, NO comma sign, and round it to the nearest integer. E.g., if your answer is $108.9, then just input 109.

Year 2020

EBIT $400

Interest expense -60

Earnings before tax

Taxes (rate=30%)

Net Income

Completion Your answers are saved automatically Remaining Time: 2 hours, 52 minutes, 46 seconds Question Completion Statu 10 12 14 & Moving to another question will save this response Question 21 12 points (Lecture 11- Capital Budgeting and valuation with Leverage and change) Concer the following noome statement for the United Supermarket that is currenty levered the EBIT in 2020 $400 a an expense) The tim faces a ta e of 30% interest expenses 500 but daplayed a negative 01 med Assuna Ft net income can be used to pay out to vectors, the total and available to payout to at the investies (bod eacty helders and debe de The diference in dofursteen (1) the total amount valabis to at investors of aquly haters and dute hers) and (2) the income that would be a toy hikers te weet the year 2 HE (That is what is (1) minus (237) Note that we assume the operating performance is unchanged so same CBT) the firm Instruction Type ONLY your numera anewer in the unt of detars. NOS sign NO comma sign, and round to the newest per Eg. If your answer is $1080, then pat 10 Year 2020 EBIT interest expense -60 Earrings before las Tax (30%) Netcone 22 Moving to another question wit save this response MacBook Pro $400 Que 2 of 2 Question 21 12 points Save Alwer (Lecture 11-Capital Budgeting and Valuation with Leverage and Exchange Risk) Consider the following income statement for the United Supermarket that is currently levered Its EBIT in 2020 is $400 and interest expense is $60 (but deployed as negative 60w the income statement on an expense). The firm faces a tax rate of 30% Assume that not income can be used to pay out to investors, the total amount available to payout to all the investors (both equity holders and holder 10 5 The difference in dollars between (1) the total amount available to all investors (both equity holders and debt holders) and (2) the income that would be available to equity holders if the firm were not levered for the 2020 (That is, what is (1) minus (217) Note that we assume the operating performance is unchanged (ac samo EBIT) the form were not leverede, franced with autyurty) Instruction Type ONLY your numerical answer in the unit of dollars, NOS sign, NO comma sign, and round it to the nearest imager. E.g. If your answer is $108.5, then just input to Year 2020 EBIT Interest expense Eamings before tax Taxes (rate-30%) Net Income $400 -60