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For abx inc the risk premium is 6 and the risk free rate is

For ABX Inc., the risk premium is 6% and the risk free rate is 3%. The firm’s corporate income tax rate is 30% and the debt-to-equity ratios is 40%. The total market value of debt is $120M. Its equity beta is 1.5. Its free cash flow is $30M and is expected to grow at a constant rate of 5% forever. What is the value of equity?

A. 4.35%

B. 4.95%

C. 5.12%

D. 6.23%

E. 6.67%

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Financial Management: For abx inc the risk premium is 6 and the risk free rate is

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