Hanover Tech Is Currently an All Equity Firm That Has

question 43

Multiple Choice

Hanover Tech is currently an all equity firm that has 320,000 shares of stock outstanding with a market price of $19 a share. The current cost of equity is 15.4 percent and the tax rate is 36 percent. The firm is considering adding $1.2 million of debt with a coupon rate of 8 percent to its capital structure. The debt will be sold at par value. What is the levered value of the equity?

• A)$5.209 million
• B)$5.312 million
• C)$5.436 million
• D)$6.512 million
• E)$6.708 million

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Definitions:

Negative Response

An adverse or unwelcoming reaction to a stimulus, situation, or input.

Aversive Conditioning

A form of behavior therapy that involves reducing undesirable habits by teaching the subject to associate an unpleasant or aversive stimulus with the habit.

Electric Shock

A sudden discharge of electricity through a part of the body, potentially causing injury or neurological effects.

McClelland's Need

A motivational theory that identifies three primary needs driving human behavior: need for achievement, need for affiliation, and need for power.