Question
You are given the following information: EBIT (for firms L and U in perpetuity) = $300,000; corporate tax rate (T) = 30%; cost of equity
You are given the following information: EBIT (for firms L and U in perpetuity) = $300,000; corporate tax rate (T) = 30%; cost of equity for firm U (Ksu or rsu) = 10%; cost of debt for firm L (Kd or rd) = 8%; level of debt for firm L (D) = $1,200,000.
What is the cost of equity of firm L (rsL)?
| 1. | 15.30% | |
| 2. | 11.33% | |
| 3. | 8.53% | |
| 4. | 10% |
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Short Term Financial Management
Authors: Terry S. Maness, John T. Zietlow
3rd Edition
0324202938, 978-0324202939
