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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Definitions:

Structure Labeled

A specific part or component of an object or system that has been marked or named for identification or explanatory purposes.

Siphons

Structures in some aquatic organisms that facilitate the exchange of water or air, often used for feeding, breathing, or locomotion.

Polychaete

A member of the class Polychaeta, these are marine annelid worms characterized by their segmented bodies, many with paired, paddle-like appendages called parapodia for movement and breathing.

Oligochaete

A class of annelids comprising earthworms and related species, characterized by having few setae (bristles) per segment.