Which of the following is a reasonable expectation of the equity value in the event of an attempted takeover?

Company T is a listed company in the retail sector.

Its current profit before interest and taxation is $5 million.

This level of profit is forecast to be maintainable in future.

Company T has a 10% corporate bond in issue with a nominal value of $10 million.

This currently trades at 90% of its nominal value.

Corporate tax is paid at 20%.

The following information is available:

Which of the following is a reasonable expectation of the equity value in the event of an attempted takeover?
A . $32.0 million
B . $41.6 million
C . $65.0 million
D . $50.2 million

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Answer: B