Cede & Co. expects its EBIT to be $163000 every year forever. The company can borrow at 8 percent. The company currently has no debt and its cost of equity is 10 percent. The tax rate is 23 percent. If the company borrows $185,000 and uses the proceeds to buy back equity, what is the weighted average cost of capital after the recapitalisation is complete? Group of answer choices 9.67% 15.13% 14.32% 8.17%
Cede & Co. expects its EBIT to be $163000 every year forever. The company can borrow at 8 percent. The company currently has no debt and its cost of equity is 10 percent. The tax rate is 23 percent. If the company borrows $185,000 and uses the proceeds to buy back equity, what is the weighted average cost of capital after the recapitalisation is complete? Group of answer choices 9.67% 15.13% 14.32% 8.17%
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
Related questions
Question
Cede & Co. expects its EBIT to be $163000 every year forever. The company can borrow at 8 percent. The company currently has no debt and its
Group of answer choices
9.67%
15.13%
14.32%
8.17%
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