An Unlevered Firm Has a Cost of Capital of 13

Multiple Choice

An unlevered firm has a cost of capital of 13.6 percent and earnings before interest and taxes of $138,000.A levered firm with the same operations and assets has both a book value and a face value of debt of $520,000 with an annual coupon of 7 percent.The applicable tax rate is 21 percent.What is the value of the levered firm?

A) $996,421
B) $907,679
C) $1,184,929
D) $910,818
E) $1,191,506