Alexandrias dance studio is currently an all equity firm, Ask an Expert

Economics

Alexandria's Dance Studio is currently an all equity firm that has 60,000 shares of stock outstanding with a market price of $24 a share. The current cost of equity is 11% and the tax rate is 40%. Alexandria is considering adding $2 million of debt with a coupon rate of 7% to her capital structure. The debt will be sold at par value. What is the levered value of the equity?

a. $.24 million

b. $2.24 million

c. $1.12 million

d. $.12 million

e. $2.84 million

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91673474

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