Multiple Choice
Alexandria's Dance Studio is currently an all-equity firm with earnings before interest and taxes of $338,000 and a cost of equity of 14.2 percent.Assume the tax rate is 22 percent.The firm is considering adding $400,000 of debt with a coupon rate of 7 percent to its capital structure.The debt will be sold at par value.What is the levered value of the equity?
A) $1,987,408
B) $1,544,620
C) $2,038,519
D) $986,420
E) $1,944,620
Correct Answer:
Verified
Correct Answer:
Verified
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