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5 . Company A currently has a WACC of 8 . 5 0 % , expected FCF of 1 5 million next year, a tax

5. Company A currently has a WACC of 8.50%, expected FCF of 15 million next year, a tax rate of 35%,12 million shares outstanding, and zero growth expectations. Company A is considering moving to a capital structure that is comprised of 35% debt and 65% equity. The debt would have an interest rate of 6%. The new funds from the debt issuance would be used to repurchase stock. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise to 10%. If this plan were carried out, what would be Company As new stock price?

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