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Use these facts for this and the following three questions. A company is financed equally by $1 million in debt and $2 million in equity.
Use these facts for this and the following three questions. A company is financed equally by $1 million in debt and $2 million in equity. The cost of debt is 4%, and the cost of equity is 11%. The company now makes a further $350,000 issue of debt and uses the proceeds to repurchase equity. This causes the cost of debt to rise to 7%. Assume the firm pays no taxes. How much debt does the company now have, to the nearest thousand dollars? $(XXXX),000 Question 12 How much equity does the company now have, to the nearest thousand dollars? $(XXX),000 Question 13 What is the WACC, the overall cost of capital, as a percent to one decimal? (X.X)\% Hint: Since WACC does not change as the capital structure changes, you can calculate the WACC from the original firm capital structure
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