Question
1- Cede & Co. expects its EBIT to be $64,000 every year forever. The firm can borrow at 8 percent. The firm currently has no
1- Cede & Co. expects its EBIT to be $64,000 every year forever. The firm can borrow at 8 percent. The firm currently has no debt, its cost of equity is 14 percent, and the tax rate is 35 percent. Assume the firm borrows $171,000 and uses the proceeds to repurchase shares.
What is the cost of equity after recapitalization? round to 2 decimal
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Fundamentals of Investment Management
Authors: Geoffrey Hirt, Stanley Block
10th edition
0078034620, 978-0078034626
