Hanover Tech Is Currently an All Equity fiRm That Has

question 38

Multiple Choice

Hanover Tech is currently an all equity firm that has 130,000 shares of stock outstanding with a market price of $36 a share. The current cost of equity is 14% and the tax rate is 35%. The firm is
Considering adding $1.5 million of debt with a coupon rate of 7% to its capital structure. The debt
Will be sold at par value. What is the levered value of the equity?

• A) $3.180m
• B) $3.520m
• C) $3.705m
• D) $4.875m
• E) $5.205m

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Definitions:

Modeling

The act of representing or simulating real-world processes, behaviors, or systems to study their properties or effects.

Coaching

A development process wherein an experienced individual, known as a coach, supports a learner or client in achieving a specific personal or professional goal by providing guidance and feedback.

Performance Standards

Clearly defined benchmarks of acceptable or expected performance outputs or actions within an organization.

Emotional Support

Providing emotional support involves showing understanding and compassion to someone during their times of need, supplying a sense of comfort and security.