Old MathJax webview

Wolverine Inc has an equity Beta of 1.2

Assume Risk free rate = 3% Equity market premium = 7 % Tax rate =21%

Wolverine Inc. has an equity beta of 1.2 and its cost of debt is 3%. Wolverine Inc. total value is $100 million and is financed with $80 million in equity and $20 million debt that has been treated as permanent. Wolverine Inc. is considering increasing i debt by replacing $10 million of equity with $10 million in debt through an investme bank who would charge Wolverine Inc. $100,000 to process this change. (a) What will be the total value of the firm after the change in capital structure? points)