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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
Company A currently has a WACC of expected FCF of million next year, a tax rate of million shares outstanding, and zero growth expectations. Company A is considering moving to a capital structure that is comprised of debt and equity. The debt would have an interest rate of 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 If this plan were carried out, what would be Company As new stock price?
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