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

question 272

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

---

Definitions:

Symphysis Pubis

A type of cartilaginous joint located between the left and right pubic bones near the front of the pelvis, providing slight movement and shock absorbtion.

Sacrum

A triangular bone at the base of the spine, formed by the fusion of several vertebrae and connecting the spine to the pelvis.

Atlantoaxial Joint

A joint between the first and second cervical vertebrae of the spine, allowing for head rotation.

Neurologist

A Neurologist is a medical doctor specializing in the diagnosis, treatment, and management of disorders related to the nervous system, including brain, spinal cord, and nerves.