Hanover Tech is currently an all equity firm that has 400,000 shares of stock outstanding with a market price of $20.00 a share. The current cost of equity is 15.4 percent and the tax rate is 36 percent. The firm is considering permanently 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. $5.312 million

c. $5.436 million

d. $6.512 million

e. $6.708 million

Answer rating: 100% (QA)

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