Question
Cede & Co. expects its EBIT to be $155,000 every year forever. The company can borrow at 7 percent. The company currently has no debt
| Cede & Co. expects its EBIT to be $155,000 every year forever. The company can borrow at 7 percent. The company currently has no debt and its cost of equity is 14 percent and the tax rate is 23 percent. The company borrows $198,000 and uses the proceeds to repurchase shares. |
| a. | What is the cost of equity after recapitalization? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| b. | What is the WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
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Money Banking And Financial Markets
Authors: Stephen Cecchetti
2nd Edition
0073523097, 9780073523095
