Use the following information for questions 17 and 18:Powell Plastics, Inc. (PP) currently has zero debt. Its free cash flow last year was $48,000,and it is a zero growth company. PP's current cost of equity is 10%, and its tax rate is 40%.The firm has 10,000 shares of common stock outstanding selling at a price per share of$48.00.PP is considering moving to a capital structure that is comprised of 30% debt and 70%equity. The debt would have an interest rate of 8%. The new funds would be used torepurchase stock. It is estimated that the increase in risk resulting from the added leveragewould cause the required rate of return on equity to rise to 12%. If this plan were carried out,what would be PP's new value of operations?O $487,805$505,524O $525,173O $734,634O $813,008

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Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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