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*Next period a firm will be worth $56 with 19% probability, $90 with 69% probability, and $120 otherwise. The firm has one senior bond outstanding

*Next period a firm will be worth $56 with 19% probability, $90 with 69% probability, and $120 otherwise. The firm has one senior bond outstanding with a face value of $37 and one junior bond outstanding with a face value of $37. The senior bond has a promised return of 2%. The junior bond has a promised return of 14%. The firm's required return on assets is 12%. What is the firm's levered cost of equity? Give your answer in percentage to the nearest 0.1%.

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:::_:::_,:::_

Correct Answer:

82.5

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