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Cops & Co. expects its EBIT to be $60,000 every year forever. The firm can borrow at 12 percent. Cops & Co. currently has no

Cops & Co. expects its EBIT to be $60,000 every year forever. The firm can borrow at 12 percent. Cops & Co. currently has no debt, nad its cost of equity is 22 percent. The tax rate is 30 percent.

(a) What is the value of the firm?

(b) What will the value be of Cops borrows $25,000 and uses the proceeds to repurchase shares?

(c) What is the cost of equity after recapitalization?

(d) What is the weighted average cost of capital (WACC) after recapitalization?

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