Q-Craft Enterprises produces plastic tubing/piping for the residential construction industry. The firm is all equity financed with a value of $400 million and a cost of equity of 10%.  It is planning to add debt to its capital structure by issuing $180 million of debt (and using the funds to repurchase shares).  Q-Craft's cost of debt will be 6.5% and its tax rate is 25% (federal, state, and local). 

 

a. When Q-Craft issues the new debt, what will be the value of the firm? 

 

b. What will be the firm's new capital structure when debt is issued?  That is, what percent will be equity and what percent will be debt?

 

c. What will be Q-Craft's levered cost of equity?

 

d. What will be Q-Craft's levered WACC?