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6) a) Clearly explain how you could use the Pecking Order Theory in your personal lives. (3 marks) b) ABC Inc. expects its EBIT to

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6) a) Clearly explain how you could use the Pecking Order Theory in your personal lives. (3 marks) b) ABC Inc. expects its EBIT to be $75,000 every year forever. The firm can borrow at 8%. ABC Inc. currently has no debt, and its cost of equity is 12%. If the tax rate is 38% and ABC Inc. borrows $130,000 and uses the proceeds to repurchase shares. 1) What is the WACC? (5 marks) ii) What are the implications for ABC Inc.'s capital structure decision? (2 marks)

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