Question: Eccles Inc., a zero growth firm, has an expected EBIT of $100,000 and a corporate tax rate of 30%. Eccles uses $500,000 of 12.0% debt,

Eccles Inc., a zero growth firm, has an expected EBIT of $100,000 and a corporate tax rate of 30%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%.

Refer to the data for Eccles Inc.What is the value of the firm according to MM with corporate taxes?

a.$528,750

b.$710,875

c.$587,500

d.$646,250

e.$475,875

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