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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