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A company has an EBIT of $5,339 in perpetuity. The unlevered cost of capital is 16.94%, and there are 28,662 common shares outstanding. The company
A company has an EBIT of $5,339 in perpetuity. The unlevered cost of capital is 16.94%, and there are 28,662 common shares outstanding. The company is considering issuing $10,920 in new bonds at par to add financial leverage. The proceeds of the debt issue will be used to repurchase equity. The YTM of the new debt is 11.98% and the tax rate is 37%. What is the weighted average cost of capital after the restructuring?
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