Question
Eccles Inc., a zero growth firm, has an expected EBIT of $100,000 and a corporate tax rate of 30%. Eccles uses $500,000 of 12.0% debt,
Eccles Inc., a zero growth firm, has an expected EBIT of $100,000 and a corporate tax rate of 30%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%.
Refer to the data for Eccles Inc.What is the firm's cost of equity according to MM with corporate taxes?
a. 28.8%
b. 25.9%
c. 32.0%
d. 23.3%
e. 21.0%
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Investments
Authors: Zvi Bodie, Alex Kane, Alan J. Marcus
10th edition
77861671, 978-0077861674
