Hey Guys Has Debt with Both a Face and a Market

question 75

Multiple Choice

Hey Guys has debt with both a face and a market value of €3,000.This debt has a coupon rate of 7% and pays interest annually.The expected earnings before interest and taxes is €1,200,the tax rate is 34%,and the unlevered cost of capital is 12%.What is the firm's cost of equity?

• A)13.25%
• B)13.89%
• C)13.92%
• D)14.14%
• E)14.25%

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Definitions:

Sample Mean

The average value computed from a sample of data, representing an estimate of the population mean.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how spread out the values of a data set are.

Population

In statistics, the entire pool from which a statistical sample is drawn.

Variance

A statistical measure of the dispersion of data points in a data set, showing how far each point in the set is from the mean and from each other.