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 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 equity?

What do you think: would it be more profitable to own 200 shares of penny’s pickles or 1 share of exxon? why do you think that?

Companies under market structures are independent

Over the past several years, joyce chen has been able to save regularly. as a result, today she has $54,188 in savings and investments. she wants to establish her own business in 5 years and feels she will need $100,000 to do so. a. if she can earn 6% on her money, how much will her $54,188 in savings/investments be worth in 5 years? will joyce have the $100,000 she needs? if not, how much more money will she need? b. given your answer to part a, how much will joyce have to save each year over the next 5 years to accumulate the additional money? assume she can earn interest at a rate of 6%. c. if joyce can afford to save only $4,000 a year then, given your answer to part a, will she have the $100,000 she needs to start her own business in 5 years?