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

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The Answer of 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

Alexandria's Dance Studio Is Currently an All-Equity Firm with Earnings