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Cede & Co. expects its EBIT to be $60,000 every year forever. The firm can borrow at 8 percent. Cede currently has no debt, its

Cede & Co. expects its EBIT to be $60,000 every year forever. The firm can borrow at 8 percent. Cede currently has no debt, its cost of equity is 13 percent, and the tax rate is 35 percent. Assume the company borrows $163,000 and uses the proceeds to repurchase shares.

1. What is the cost of equity after recapitalization?

2. What is the WACC?

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