Thompson & Thomson is an all equity firm that has 500,000 shares of stock outstanding. The company is in the process of borrowing $10 million at 9% interest to repurchase 200,000 shares of the outstanding stock. What is the value of this firm if you ignore taxes? A. $23.0 million B. $24.8 million C. $25.0 million D. $26.2 million E. $27.3 million.

B. Your firm has a debt-equity ratio of .75. Your pre-tax cost of debt is 8.5% and your required return on assets is 15%. What is your cost of equity if you ignore taxes? A. 11.25% B. 12.21% C. 16.67% D. 19.88% E. 21.38%