Hanover Tech Is Currently an All Equity Firm That Has

question 29

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 34 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)$5.288 million
• C)$5.312 million
• D)$6.512 million
• E)$6.708 million

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