Question
A business has 645,000 bonds in issue, which are sold at par. The value of equity is 829,000. The bonds have an interest rate of
A business has 645,000 bonds in issue, which are sold at par. The value of equity is 829,000. The bonds have an interest rate of 7.5% and pay interest on an annual basis. The expected EBIT is 160000 and the equity borrowing cost without leverage is 12%. The tax rate is 35%. What is the cost of equity with leverage?
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Financial Management For Decision Makers
Authors: Peter Atrill
9th Edition
1292311436, 978-1292311432
