A Calgary Firm with No Debt Has 200,000 Shares Outstanding

question 262

Multiple Choice

A Calgary firm with no debt has 200,000 shares outstanding valued at $20 each. Its cost of equity is 12%. The firm is considering adding $1 million in debt to its capital structure. The coupon rate would be 8% and the bonds would sell for par value. The firm's tax rate is 34%. How much will the firm be worth after adding the debt?

• A) $4.033 million
• B) $4.180 million
• C) $4.340 million
• D) $4.660 million
• E) $5.000 million

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Definitions:

Breach Client Confidences

The unauthorized disclosure of confidential information shared by a client in a professional setting, undermining trust and ethical standards.

Written Permission

A formal authorization, documented in writing, allowing specific actions to be carried out or information to be disclosed.

Confidentiality

Confidentiality is the principle of maintaining secrecy and privacy regarding information shared in a trusted context, such as between a therapist and client.

Clinical Competence

The ability of healthcare professionals to effectively perform their duties and provide high-quality care to patients.