# Question

Jack and Jill Inc. very nearly tumbled into bankruptcy last year. To refinance the firm, the firm issued $25 million worth of 30-year income bonds. These bonds have an 8-percent coupon that is payable only if the firm achieves earnings before interest and tax (EBIT) of $3 million.

Suppose the firm exactly achieves its target and pays out the full coupon interest amount.

Determine the company’s net income if the tax rate is 25 percent.

Suppose the firm exactly achieves its target and pays out the full coupon interest amount.

Determine the company’s net income if the tax rate is 25 percent.

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