The required rate of return on Montreal Computing Power's equity is 15 percent and the yield on their debt is 7 percent.There are no taxes and all cash flows are perpetuities.If the value of the debt is $1,000 and value of the equity is $1,000,what level of earnings must Montreal Computing Power earn in order to support the current valuation?
A) $290
B) $300
C) $330
D) $220
Correct Answer:
Verified
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