Cede & Co. expects its EBIT to be $53,000 every year forever. The firm can...
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Cede & Co. expects its EBIT to be $53,000 every year forever. The firm can borrow at 9 percent. The firm currently has no debt, its cost of equity is 12 percent, and the tax rate is 35 percent. Assume the firm borrows $149,000 and uses the proceeds to repurchase shares. a. What is the cost of equity after recapitalization? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity ? % b. What is the WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC ?%
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