The Zercon Company Has EBIT of $50,000 and Market Value

Multiple Choice

The Zercon Company has EBIT of $50,000 and market value debt of $100,000 outstanding with a 9% coupon rate. The cost of equity for an all equity firm would be 14%. Zercon has a 35% corporate tax rate. Investors face a 20% tax rate on debt receipts and a 15% rate on equity. Determine the value of Zercon.

A) $263,080.
B) $332,143.
C) $258,537.
D) $162,948.
E) $120,000.