Multiple Choice
An unlevered firm has expected earnings of $33,062.50 and a market value of equity of $287,500.The firm is planning to issue $50,000 of debt at 7 percent interest and use the proceeds to repurchase shares at their current market value.Ignore taxes.What will be the cost of equity after the repurchase?
A) 12.45%
B) 13.58%
C) 13.85%
D) 12.04%
E) 12.73%
Correct Answer:
Verified
Correct Answer:
Verified
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