In: Finance
4. Clarkson Corporation is currently an all equity firm that has 450,000 shares of stock outstanding with a market price of $52.40 a share. The current cost of equity is 10.5 percent and the tax rate is 25 percent. The firm is considering adding $6.3 million of debt with a coupon rate of 6 percent to its capital structure. The debt will be sold at par value. What is the levered value of the equity?
a |
$18,855,000 |
|
b |
$19,247,000 |
|
c |
$18,496,000 |
|
d |
$19,042,000 |
|
e |
$18,637,000 |