Boutelle Homes Has an All-Equity Value of $648,200,a Cost of Equity

Multiple Choice

Boutelle Homes has an all-equity value of $648,200,a cost of equity of 11.7 percent,and a tax rate of 35 percent.Assume the firm's capital structure changes to 30 percent debt followed by a lowering of the tax rate to 21 percent.What will be the change in the levered value of the firm due to the reduction in the tax rate?

A) $16,020
B) $17,520
C) $29,169
D) −$27,224
E) −$17,520