Hanover Tech is currently an all equity firm that has 320,000 shares of stock outstanding with a market price of $19 a share.The current cost of equity is 15.4 percent and the tax rate is 34 percent.The firm is considering adding $1.2 million of debt with a coupon rate of 8 percent to its capital structure.The debt will be sold at par value.What is the levered value of the equity?
A) $5.209 million
B) $5.288 million
C) $5.312 million
D) $6.512 million
E) $6.708 million
Correct Answer:
Verified
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