Stevenson's Bakery Is an All-Equity Firm That Has Projected Perpetual

question 70

Multiple Choice

Stevenson's Bakery is an all-equity firm that has projected perpetual earnings before interest and taxes of $138,000 a year.The cost of equity is 13.7 percent and the tax rate is 32 percent.The firm can borrow money at 6.75 percent.Currently,the firm is considering converting to a debt-equity ratio of 0.45.What is the firm's levered value?

• A)$527,613
• B)$689,919
• C)$752,987
• D)$829,507
• E)$903,682

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