Question
Cede & Co. expects its EBIT to be $76,912 every year forever. The firm can borrow at 11%. Cede currently has no debt, and its
Cede & Co. expects its EBIT to be $76,912 every year forever. The firm can borrow at 11%. Cede currently has no debt, and its cost of equity is 25%. The tax rate is 34%.
What is the firm's cost of equity capital after borrowing $45,000 and using the proceeds to repurchase shares (i.e., after recapitalization)?(Answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations.)
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Corporate Finance Core Principles and Applications
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
3rd edition
978-0077971304, 77971302, 978-0073530680, 73530689, 978-0071221160, 71221166, 978-0077905200
