Boob-Tube Electronics Inc has long term bonds with a face value of $2M, the coupon rate on the bonds is 5% and the yield on the bonds is also 5%. The unlevered cost of equity is 12.5%, and the value of Boob-Tube's equity is $3.6M

The corporate tax rate is 40%. What is the required return of shareholders at Boob-Tube?
A) 13.5%
B) 14.2%
C) 12.5%
D) 14.6%
E) 15.0%


E

Business

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