Multiple Choice
The Dance Studio is currently an all-equity firm that has 22,000 shares of stock outstanding with a market price of $27 a share.The current cost of equity is 12 percent and the tax rate is 23 percent.The firm is considering adding $225,000 of debt with a coupon rate of 6.25 percent to its capital structure.The debt will sell at par.What will be the levered value of the equity?
A) $325,500
B) $420,750
C) $521,250
D) $472,750
E) $594,000
Correct Answer:
Verified
Correct Answer:
Verified
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