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What will the value of Abyssinia Coffee Corporate Company

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Reference no: EM132572028

Question - Abyssinia Coffee corporate company has 2,00,000 shares of stock outstanding at a market price of $ 25 per share. The cost of equity is 15%. The company is considering adding $ 2 million of debt with a coupon rate of 12%. The debt will sell at par. The tax rate is 35%.

Required -

1. What will the value of Abyssinia Coffee Corporate Company be after they add the debt to their capital structure?

2. What is the levered value of the equity?

Reference no: EM132572028

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