Homework answers / question archive / Company J is debt-free and has a weighted average cost of capital of 12

Company J is debt-free and has a weighted average cost of capital of 12

Finance

Share With

Company J is debt-free and has a weighted average cost of capital of 12.7%. The current market value of the equity is $2.8 million and there are no taxes. According to MM proposition I, what will be the value of the company if it changes to a debt-equity ratio of 5?

A.2,100,000

B. 5,600,000

C. 1,400,000

D. None

E. 2,800,000