Stevenson's Bakery Is an All-Equity Firm That Has Projected Perpetual

Multiple Choice

Stevenson's Bakery is an all-equity firm that has projected perpetual earnings before interest and taxes of $138,000 a year.The cost of equity is 13.7 percent and the tax rate is 32 percent.The firm can borrow money at 6.75 percent.Currently,the firm is considering converting to a debt-equity ratio of 0.45.What is the firm's levered value?

A) $527,613
B) $689,919
C) $752,987
D) $829,507
E) $903,682