leverage, it will call its old bonds and replace them with new $8\%$ coupon bonds. The company will sell or repurchase stock at the new equilibrium price to complete the capital structure change.

The firm pays out all earnings as dividends; hence, its stock is a zero growth stock. Its current cost of equity, $r_s,$ is $14\%.$ If it increases leverage, $r_s$ will be $16\%.$ If it decreases leverage, $r_s$ will be $13\%.$

Present situation $(50\%$ debt$)$:

What is the firm's WACC? Do not round intermediate calculations. Round your answer to three decimal places.

$\%$

$

million

$60\%$ debt:

What is the firm's WACC? Do not round intermediate calculations. Round your answer to two decimal places.

$\%$

$

million

$40\%$ debt:

What is the firm's WACC? Do not round intermediate calculations. Round your answer to two decimal places.

$\%$

$

million