Multiple Choice
The Studio is currently an all-equity firm that has 68,000 shares of stock outstanding with a market price of $36.80 a share.The current cost of equity is 11.7 percent,and the tax rate is 35 percent.The firm is considering adding $750,000 of debt with a coupon rate of 5.8 percent to its capital structure.The debt will be sold at par value.What is the levered value of the equity?
A) $2,014,900
B) $3,035,500
C) $1,785,000
D) $2,005,200
E) $1,806,400
Correct Answer:
Verified
Correct Answer:
Verified
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