Eccles Inccorporated
Eccles Incorporated, a zero growth firm, has an expected EBIT of $100,000 and a corporate tax rate of 25%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%.
Refer to the data for Eccles Incorporated.What is the firm's cost of equityaccording to MM with corporate taxes?
A. 21.0%
B. 23.3%
C. 25.9%
D. 28.8%
E. 32.0%
Answer: E
Business
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