An Unlevered Firm Has Expected Earnings of $33,062

question 40

Multiple Choice

An unlevered firm has expected earnings of $33,062.50 and a market value of equity of $287,500.The firm is planning to issue $50,000 of debt at 7 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)12.45%
• B)13.58%
• C)13.85%
• D)12.04%
• E)12.73%

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Definitions:

Personality

The combination of characteristics or qualities that form an individual's distinctive character, influencing patterns of thought, emotion, and behavior.

Narcissism

A character attribute marked by an exaggerated feeling of self-worth, a desire for others' admiration, and an absence of compassion for other people.

Developmental Period

a specific phase in the life cycle of an organism during which it develops specific capabilities or undergoes particular experiences that are essential for its growth and maturation.

Puberty

A developmental stage in which an individual undergoes physical changes leading to sexual maturity and the capability of reproduction.