D/E. = 0.27. after debt addition. increase to. 2.04 MARKET Rate Premium = 5% Current...
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D/E. = 0.27. after debt addition. increase to. 2.04
MARKET Rate Premium = 5%
Current EBIT = $. 300,000
Interest = $ 60,000
Rf. =. 3%
Beta =. 0.9
Tax Rate. =. 30%
An investment bank has advised the firm to restructure by issuing debt to increase D/E to 2.04 and using the proceeds to buy back equity. The new debt will approximately double interest expense and have little impact on EBIT. What is the new estimated cost of capital?
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