Question 14 (1 point)

For this and the next question (Assume earnings growth): Gomez computer systems has EBIT of $200,000, a growth rate of 6%, and faces a tax rate of 40%. In order to support growth, Gomez must reinvest 20% of its EBIT in net operating assets. Gomez has $300,000 in 8% debt outstanding. A similar company with no debt has a cost of equity of 11% (i.e. rEU = 11%). According to the MM extension with growth, what is the value of Gomez's interest tax savings?

Question 14 options:

1)

$87,273

2)

$192,000

3)

$120,000

4)

$288,000

5)

$300,000

Question 15 (1 point)

According to the MM extension with growth, what is the unlevered value of the firm? [To help you correctly answer this question, please note that FCF = $80,000].

Question 15 options:

1)	$1,090,909

2)	$1,600,000

3)	$1,792,000

4)	$2,400,000

5)	$4,000,000