The Addopa Co

question 195

Multiple Choice

The Addopa Co. has a projected annual EBIT of $5,000. The company is currently 100% equity financed with a cost of equity of 14%. The tax rate is 34% and the cost of debt is 10%. What is the value of the firm if they borrow $12,000?

• A) $23,571
• B) $24,771
• C) $26,009
• D) $27,651
• E) $29,229

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