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XYZ Co. has an unlevered cost of capital of 20%, a tax rate of 20% percent,...

XYZ Co. has an unlevered cost of capital of 20%, a tax rate of 20% percent, and expected earnings before interest and taxes of $400,000 (in perpetuity). The company has outstanding bonds with a market value of $1 million, and a yield of 6%. What is the cost of equity?

A. 15.64%

B. 16.42%

C. 25.12%

D. 38.67%

E. none of the above

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jeff jeffy answered 2 years ago
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