Roy's Toy,Inc.currently has no debt outstanding.Its current cost of equity is 12% and the current value of the company is $20,000,000.Roy is proposing to finance 1/4 of its assets with debt at a cost of 8% per annum.What will be Roy's cost of levered equity if things go as planned? Ignore any tax effects.
A) 12.00%
B) 13.00%
C) 13.33%
D) none of the above
Correct Answer:
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