A firm expects its EBIT to be $169,000 every year, in perpetuity.The company is currently unlevered with a cost of equity of 18%.It faces a
A firm expects its EBIT to be $169,000 every year, in perpetuity.The company is currently unlevered with a cost of equity of 18%.It faces a tax rate of 23%.The firm plans to borrow $170,000 and use the proceeds to repurchase shares.If the firm's cost of borrowing is 11%, what is its WACC after the recapitalization?Hint: use MM Prop I to find the market value of equity and MM Prop II to find the cost of equity
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Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
