Question
14. Assume a company is 100% equity financed. Its earnings is $1, its initial P/E ratio is 10. Itsr=10%, g=0%. If the firm refinances to
14. Assume a company is 100% equity financed. Its earnings is $1, its initial P/E ratio is 10. Itsr=10%, g=0%. If the firm refinances to 50% debt (with 5% cost of capital) and 50% equity (with 15%cost of capital), what is its P/E after refinancing (no tax)? (3 points)A. 10B. 5C. 2D. 6.8
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Financial Literacy For Managers
Authors: Richard A. Lambert
1st Edition
1613630182, 978-1613630181
