suppose that Lily Mack photography expects ebit to be approximately 220,000 per year for the foreseeable...

suppose that Lily Mack photography expects ebit to be approximately 220,000 per year for the foreseeable future and that it has a thousand 10 year 9% annual coupon bonds outstanding what would the approximately tax rate be for use in the calculation of the depth component of Lily Max wacc

Expert Solution

given ebit is 200000

now we need to find interest expense to calculate taxable income

coupon rate 9%

given bonds are 1000

interest expense is = 1000*1000*0.9% = 90000

so EBT(earnings before tax ) = 200000-90000 = 110000

the given income is in the slab of (100001-335000) and tax rate is 39%

so tax rate for wacc purpose is 39%

jeff jeffy answered 2 years ago

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