Question
4. Clarkson Corporation is currently an all equity firm that has 450,000 shares of stock outstanding with a market price of $52.40 a share. The
4. Clarkson Corporation is currently an all equity firm that has 450,000 shares of stock outstanding with a market price of $52.40 a share. The current cost of equity is 10.5 percent and the tax rate is 25 percent. The firm is considering adding $6.3 million of debt with a coupon rate of 6 percent to its capital structure. The debt will be sold at par value. What is the levered value of the equity?
| a | $18,855,000 | |
| b | $19,247,000 | |
| c | $18,496,000 | |
| d | $19,042,000 | |
| e | $18,637,000 |
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A Fast And Frugal Finance
Authors: William P. Forbes, Aloysius Igboekwu, Shabnam Mousavi
1st Edition
0128124954, 978-0128124956
