Stoddard Datsun Restorations ( SD ) is an all - equity firm, that expects free cash flows

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Question:

Stoddard Datsun Restorations

(

)

is an all

-

equity firm, that expects free cash flows of $

450, 000

per year in perpetuity. The cost of unlevered equity is

12 % .

SDR is considering a recapitalization, where it would issue $

750, 000

in debt at a

6 %

interest rate. The corporate tax rate is

40 %

Calculate the cost of levered equity for SDR after the recapitalization.

(

Assume perfect capital markets with taxes.

)

please answer this step by step with all the actual calculations please.

Posted Date: May 18, 2024 07:04 PM

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Stoddard Datsun Restorations ( SD ) is an all - equity firm, that expects free cash flows

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