PDQ, Inc., expects EBIT to be approximately $14.3 million per year for the foreseeable future,...

Question:

PDQ, Inc., expects EBIT to be approximately $14.3 million per year for the foreseeable future, and it has 50,000 20-year, 10 percent annual coupon bonds outstanding. What would the appropriate tax rate be for use in the calculation of the debt component of PDQ's WACC?

Earnings before interest and taxes

Earnings before interest and taxes are also known as operating income. It is commonly used to assess the efficiency of the company on its business operation as it refers to the income of the firm after deducting its both direct and indirect expenses.

Answer and Explanation:

In this problem, let's create a tax table which we could use as reference of the rate:

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Earnings before taxes Income Tax Rate

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