An All-Equity Firm Has Expected Earnings of $14,200 and a Market

question 78

Multiple Choice

An all-equity firm has expected earnings of $14,200 and a market value of $82,271.The firm is planning to issue $15,000 of debt at 6.3 percent interest and use the proceeds to repurchase shares at their current market value.Ignore taxes.What will be the cost of equity after the repurchase?

• A)17.99%
• B)18.08%
• C)19.70%
• D)18.97%
• E)19.55%

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