Question: Problem #1 (7 marks) Dewer International is an all equity firm, with a market value =$172,500. The firm has a tax rate of 35% and

Problem #1 (7 marks) Dewer International is an all equity firm,

Problem #1 (7 marks) Dewer International is an all equity firm, with a market value =$172,500. The firm has a tax rate of 35% and expected earnings before interest and taxes of $26,500. If Dewer issues $40,000 in bonds with a 7% coupon and uses the proceeds to repurchase shares, what is the levered cost of equity? Assume there is no cost of financial distress and general M\&M assumptions apply

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