answer these questions homework for MM with taxes1. Short AnswerBruce & Co. expects its EBIT to be$185,000 every year forever.The firm can borrow at 9 percent. Brucecurrently has no debt, and its cost ofequityis 16 percent. If the tax rate is 35 percent,what is the value of the firm? What willthe value be if Bruce borrows $135,000and uses the proceeds to repurchaseshares?what is the cost of equity afterrecapitalization? What is the WACC?What are the implications for the firm' scapital structure decision? 2. Short AnswerWilliamson, Inc., has a debt-equity ratio of2.5. The firm'sweighted average cost of capital is 10percent, and its pretax cost of debt is 6percent.Williamson is subject to a corporate taxrate of 35 percent.a. What is Williamson' s cost of equitycapital?b. What is Williamson' s unlevered cost ofequity capital?c. What would Williamson' s weightedaverage cost of capital be if the firm' sdebt-equity ratio were .75? What if it were 1.5?

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Answered: Bruce & Co. expects its EBIT to be…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter17: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 8P

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