AAA Corporation and BBB Corporation are identical in every way except their capital structures. AAA Corporation, an all-equity firm, has 30 million shares of stock outstanding, currently worth $55 per...

AAA Corporation and BBB Corporation are identical in every way except their capital structures. AAA Corporation, an all-equity firm, has 30 million shares of stock outstanding, currently worth $55 per share. BBB Corporation uses leverage in its capital structure. The market value of BBB’s debt is $400mil., and its cost of debt is 4.5 percent. Each firm is expected to have earnings before interest and tax of $165mil. in perpetuity. Assume that every investor can borrow at 4.5 percent per year. Corporate tax rate is 40%.

Q14. How much will it cost to purchase 20% of BBB's equity?