Question
Bruce & Co. expects its EBIT to be $66,000 every year forever. The company can borrow at 4 percent. The company currently has no debt,
Bruce & Co. expects its EBIT to be $66,000 every year forever. The company can borrow at 4 percent. The company currently has no debt, its cost of equity is 9 percent, and the tax rate is 35 percent. The company borrows $100,000 and uses the proceeds to repurchase shares.
What is the cost of equity after recapitalization? (answer as a percent rounded to 2 decimal places) Cost of equity %
What is the company's WACC? ( answer as a percent rounded to 2 decimal places) WACC %
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Cost Management Measuring Monitoring And Motivating Performance
Authors: Leslie G. Eldenburg, Susan K. Wolcott
2nd Edition
978-0-470-7694, 0470769424, 978-0470769423
