Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 08, 2024

Bruce & Co. expects its EBIT to be $78,000 every year forever. The company can borrow at 10 percent. The company currently has no debt,

Bruce & Co. expects its EBIT to be $78,000 every year forever. The company can borrow at 10 percent. The company currently has no debt, its cost of equity is 13 percent, and the tax rate is 35 percent. The company borrows $104,000 and uses the proceeds to repurchase shares.

What is the cost of equity after recapitalization?

What is the company's WACC?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

Step: 3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions

Question

An experimenter is concerned that the variability of responses using two different ex- perimental procedures may not be the same. Before conducting his research, he con- ducts a prestudy with random...

Answered: 1 week ago

Question

★★★★★

The MFG Corporation is planning to produce and market three different products. Let x1, x2, and x3 denote the number of units of the three respective products to be produced. The preliminary...

Answered: 1 week ago

Question

★★★★★

The risk-free rate is 5 percent and the expected return on the market portfolio is 9 percent. If a company has a beta of 0.90, what is the stock's expected rate of return according to CAPM?

Answered: 1 week ago

Question

★★★★★

Check all that apply. Most hosts on the Internet will have these protocols active on them. None of these answers DHCP server DNS server DIP O UDP DNS client Question 5 Check all that apply. Most...

Answered: 1 week ago

Question

★★★★★

5. Cumulative frequencies A statistics content developer at Aplia wanted to know whether study skills are related to memory quality. She invited students to perform an online memory task. The...

Answered: 1 week ago

Question

★★★★★

The Gable Company manufactures trendy, high-quality, moderately priced watches. As Gable's senior financial analyst, you are asked to recommend a method of inventory costing The chief financial...

Answered: 1 week ago

Question

★★★★★

Suppose, in the single-factor model, an obligor has a one-period default probability of 2.75 percent and an asset return correlation to the market factor of =0.4. What fractions of its asset return...

Answered: 1 week ago

Question

★★★★★

1. Find the most frequent bigrams (20 pts) Please complete the freq_bigram function to find the nn most frequent bigrams. Your function should return a list of top_n tuples. Each of the tuples should...

Answered: 1 week ago

Question

★★★★★

Objective: This activity has the purpose of helping students to implement sorted lists with links (dynamic memory). (Objective 4). Students Instructions: After studying this module, write the answers...

Answered: 1 week ago

Previous Question Next Question