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An All-Equity Firm Has Expected Earnings of $14,200 and a Market

Question 78

Multiple Choice

An all-equity firm has expected earnings of $14,200 and a market value of $82,271.The firm is planning to issue $15,000 of debt at 6.3 percent interest and use the proceeds to repurchase shares at their current market value.Ignore taxes.What will be the cost of equity after the repurchase?


A) 17.99%
B) 18.08%
C) 19.70%
D) 18.97%
E) 19.55%

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