Gail's Dance Studio is currently an all equity ﬁrm that has 80,000 shares outstanding with a market price of €42 a share.The current cost of equity is 12% and the tax rate is 34%.Gail is considering adding €1 million of debt with a
Coupon rate of 8% to her capital structure.The debt will be sold at par value.What is the levered value of the equity?
A)€2.4 million
B)€2.7 million
C)€3.3 million
D)€3.7 million
E)€3.9 million

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The Answer of Gail's Dance Studio is currently an all equity ﬁrm that has 80,000 shares outstanding with a market price of €42 a share.The current cost of equity is 12% and the tax rate is 34%.Gail is considering adding €1 million of debt with a
Coupon rate of 8% to her capital structure.The debt will be sold at par value.What is the levered value of the equity?
A)€2.4 million
B)€2.7 million
C)€3.3 million
D)€3.7 million
E)€3.9 million

Gail's Dance Studio Is Currently an All Equity ﬁRm That