Case II - Example Unlevered FirmLevered Firm EBIT5,000 Interest0500 Taxable Income 5,0004,500 Taxes (34%)1,7001,530 Net Income3,3002,970 CFFA3,3003,470 16-21
{"Image DocumentName": "Case II - Example Unlevered Firm Levered Firm EBIT 5,000 Interest 500", "Image ImageDescription": "500. Taxable Income. 4,500. Taxes (34%) 1,700. 1,530. Net Income. 3,300. 2,970. CFFA. 3,470. The levered firm has 6,250 in 8% debt, so the interest expense = .08(6,250) = 500. CFFA = EBIT \u2013 taxes (depreciation expense is the same in either case, so it will not affect CFFA on an incremental basis)", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}