Question
As a finance teacher, show me how the two questions get to the answers. An all-equity firm expects perpetual EBIT of $920,000. The firm has
As a finance teacher, show me how the two questions get to the answers.
An all-equity firm expects perpetual EBIT of $920,000. The firm has a cost of equity of 11.5% and a tax rate of 21%. The firm is considering issuing an amount of debt equal to 40% of the current value of the firm. The firm can borrow perpetual debt at 4.8%.
What would be the firms cost of equity after the debt is issued? 14.60%
What would be the firms WACC after the debt is issued? 10.61%
The provided answers are correct, and I will only need the calculatin process. Thank you!
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International Finance Discussion Papers Do Recessions Affect Potential Output
Authors: United States Federal Reserve Board, Jane Haltmaier
1st Edition
1288723393, 9781288723393
