Value- 812,500

EBIT- 100,000

Cost of equity- 8%

P0- 25

shares outstanding- 32500

tax rate- 35%

Value of debt- 0

The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 50% debt based on market values. Its cost of equity will increase to 10% to reflect the increased risk. bonds can be sold at a cost, rd of 6%. Santiago is a no growth firm. Hence, all its earnings are paid out as dividends. Earnings are expected to be constant over time.

1)Find the company's WACC

2) What is the value of the firm (V)?

3) What is the new price of stock per share.

4) How many shares are repurchased?

5) what is the EPS after recapitalization?

USE EXCEL please

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