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Your firm has debt worth $200,000, with a yield of 9 percent, and equity worth $300,000....

Your firm has debt worth $200,000, with a yield of 9 percent, and equity worth $300,000. It is growing at a 5 percent rate, and faces a 40 percent tax rate. A similar firm with no debt has a cost of equity of 12 percent. Under the MM extension with growth, what is its cost of equity?

12.0%

9.36%

12.8%

13.2%

14.0%

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Answer #1

20,000 nebt 300000 Ke 12y eDuity Kad Taur2 yoy value of tom btal Debttauity 200000 t300000 $500000 Ke t (ke K Debt EQuity Fs

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