Dyson IncCurrently Finances with 20

question 82

Multiple Choice

Dyson Inc.currently finances with 20.0% debt (i.e. ,w_d = 20%) ,but its new CFO is considering changing the capital structure so w_d = 36.0% by issuing additional bonds and using the proceeds to repurchase and retire common shares so the percentage of common equity in the capital structure (w_c) = 1 - w_d.Given the data shown below,by how much would this recapitalization change the firm's cost of equity? Do not round your intermediate calculations.(Hint: You must unlever the current beta and then use the unlevered beta to solve the problem. ) ​

• A) 1.61%
• B) 1.66%
• C) 1.24%
• D) 1.68%
• E) 1.69%

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Definitions:

Maturity

The point in time when a financial instrument, such as a bond or loan, reaches its due date and the principal must be repaid.

Bond

A fixed income investment in which an investor loans money to an entity that borrows the funds for a defined period at a variable or fixed interest rate.

Characteristics Of A Bond

Aspects that define a bond, including its maturity date, face value, coupon rate, and issuer, determining its suitability for investors.

Interest Rate

The cost incurred, calculated as a fraction of the principal, for utilizing assets, charged by the lender to the borrower.