Required:

Determine value of the company

Determine the cost of equity when management decides to transform $40\%$ of equity into debt.

Explain the adjustment of the cost of equity

Now assume that HD operates in a world with corporate taxes $(20\%)$

Required:

Determine value of the company $(100\%$ equity$)$

Determine the value of the company after refinancing with $2mln$ debt. Debt will be used to repurchase shares.

Determine the cost of equity when management decides to transform $40\%$ of equity into debt.

Calculate the wacc after refinancing