What is the levered value of the equity

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Reference no: EM131966433

Alexandria's Dance Studio is currently an all equity firm that has 60,000 shares of stock outstanding with a market price of $24 a share. The current cost of equity is 11% and the tax rate is 40%. Alexandria is considering adding $2 million of "permanent" debt with a coupon rate of 7% to her capital structure. The debt will be sold at par value. What is the levered value of the firm (Vl)? What is the levered value of the equity?

Reference no: EM131966433

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