Wail Inc. currently has 130,000 shares of stock outstanding with a market price of $36 a share. Wails next years projected dividend is $4.5 and its estimated long-term growth rate is 5%. Its outstanding debt consists of 4,560 coupon bonds each with a face value of $1,000, maturity of five years, and an annual coupon rate of 9% with semi-annual payments. The bonds are traded at par. The tax rate is 40 percent. Suppose Wail wants to get rid of all its debt and become all-equity.

Calculate the all equity cost of capital.

9%

5.4%

22.47%

17.5%

14.36%

What is the all-equity firm value?

$9,240,000

$4,680,000

$11,064,000

$4,560,000

$7,416,000