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Question 20 (4 points) Tom Scott is the owner of, president, primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by
Question 20 (4 points) Tom Scott is the owner of, president, primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40 hours each week, the company's EBIT will be $500,000 per year; if he works a 50-hour week, the company's EBIT will be $600,000 per year. The company is currently worth $3 million. The company needs a cash infusion of $2 million, and it can issue equity or issue debt with an interest rate of 9 percent. Assume there are no corporate taxes. What is the annual cash flow to Tom if he works 40 hours each week and the company issues debt? $ 260,000 $ 320,000 $ 300,000 $360,000 $ 420,000 Question 21 (4 points) Tom Scott is the owner of, president, primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40 hours each week, the company's EBIT will be $500,000 per year; if he works a 50-hour week, the company's EBIT will be $600,000 per year. The company is currently worth $3 million. The company needs a cash infusion of $2 million, and it can issue equity or issue debt with an interest rate of 9 percent. Assume there are no corporate taxes. What is the annual cash flow to Tom if he works 50 hours each week and the company issues equity? $ 360,000 $ 420,000 $ 320,000 $ 260,000 $ 300,000
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