Your equity beta is 2.2, the riskless rate is 3.1%, and the expected return on the stock market is 14%. a. What is your levered cost of equity? b. You are considering a project with an upfront cost of $2M, and a yearly EBIT of $400,000, starting one year from today and continuing for the foreseeable future. Your tax rate is 36% and your cost of debt is 7%. You will be borrowing $1.4M of the startup costs. In addition to any debt you take on for this project, your firm must also make yearly payments of $150,000 to service debt taken to finance an earlier, failed project. If you are a major shareholder in this firm, would you make this investment? c. If you were a bondholder in this firm, would the answer to B worry you? Why? What is one bond provision that might make you less worried in this situation?

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Okay here are the answers a Levered cost of equity Ke Rf Rm Rf 31 2214 31 31 221... View the full answer