Firms WACC = WACC = wd x kd x (1 - t) + we x ke 0.06 * 0.6 * (1-.4) + .75 *.1 =

GenCorp currently has 6%, perpetual debt and 10,000 shares outstanding. The debt accounts for 25% of firm value. The firm's EBIT is $100,000 with zero growth. Current cost of equity is 10% and the tax rate is 40%. a What is the firm's current total market value? b. What is the firm's current stock price? The firm is considering recalling existing debt and issuing new debt at 7% which will increase the debt ratio from 25% to 40%. The new funds will be used to replace the old debt and repurchase stock. The cost of equity will increase to 11% Outline the steps in the market price's adjustment to the new plan. What will be the new stock price after the recapitalization