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Need help! Anson Jackson Court Company (AJC) The Anson Jackson Court (AJC) currently has $150,000 market value (and book value) of perpetual debt outstanding carrying
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Anson Jackson Court Company (AJC) The Anson Jackson Court (AJC) currently has $150,000 market value (and book value) of perpetual debt outstanding carrying a coupon rate of 6%. Its earnings before interest and taxes (EBIT) are $89,000, and it is a zero growth company. AJC's current cost of equity is 1086, and its tax rate is 25%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $60.00. Refer to the data for Anson Jackson Court (AJC). AJC is considering moving to a capital structure that is comprised of 25% debt and 75% equity, based on market values. The new funds would be used to replace the old debt and to repurchase stock. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on debt to rise to 6.56%, while the required rate of return on equity would rise to 10.07%. If this plan were carried out, what would be AJC's new WACC and total value? WACC Total Market Value a. 9.28%; $660,034 6.8.28%, 5690,034 O C8.78%; $760,034 O 8.9.289; 5820,034 Step by Step Solution
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