Question
Assume that capital markets are perfect. A firm finances its operations via $60 million in stock with a required return of 15% and $40 million
Assume that capital markets are perfect. A firm finances its operations via $60 million in stock with a required return of 15% and $40 million in bonds at 8%. Assume the company decides to issue an additional $10 million bonds and use the proceeds to retire $10 million worth of equity.
(a) what would happen to the firms WACC? Please explain in detail the changes to WACC.
(b) What would happen to the required return on the companys stock? Does this increase or decrease, how? Please explain.
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Options Trading For Beginners How To Generate Predictable Income And Make A Living Without Taking Big Risks Even If You Re A Complete Beginner
Authors: Greg Middleton
1st Edition
979-8866955046
