Hanover Tech Is Currently an All-Equity Company That Has 145,000

question 13

Multiple Choice

Hanover Tech is currently an all-equity company that has 145,000 shares of stock outstanding with a market price of $22 a share. The current cost of equity is 13.9 percent and the tax rate is 21 percent. The company is considering adding $1.5 million of debt with a coupon rate of 7.5 percent to its capital structure. The debt will be sold at par value. What is the levered value of the equity?

• A) $2.209 million
• B) $2.005 million
• C) $2.312 million
• D) $2.012 million
• E) $2.108 million