ensen's, an all-equity firm, has a total market value of $548,000. The firm is thinking of adding $262,000 of debt at an interest rate of 6% and using the proceeds to buy back shares. What would be the firm's weighted average cost of capital after it adds the debt if the firm pays a tax rate of 40% and its unlevered cost of equity is 12.6%?   Question 14 options:   A)  15.25%   B)  9.95%   C)  16.23%   D)  10.19%   E)  10.57%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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ensen's, an all-equity firm, has a total market value of $548,000. The firm is thinking of adding $262,000 of debt at an interest rate of 6% and using the proceeds to buy back shares. What would be the firm's weighted average cost of capital after it adds the debt if the firm pays a tax rate of 40% and its unlevered cost of equity is 12.6%?
 

Question 14 options:

 

A) 

15.25%
 

B) 

9.95%
 

C) 

16.23%
 

D) 

10.19%
 

E) 

10.57%
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