Choose option a,b,c,d,e for the following: Question 4 – Chen and Co. expect its EBIT to be $100,000 every year forever. The firm can borrow at 11%. Chen currently has no debt, and its cost of equity is 18%. The tax rate is 31%. Chen will borrow $61,000 and use the proceeds to repurchase shares. What will the WACC be after recapitalization? a. 15.17% b. 17.15% c. Data are insufficient to formulate a response. d. 18% e. 11.17%

Choose option a,b,c,d,e for the following: Question 4 – Chen and Co. expect its EBIT to be $100,000 every year forever. The firm can borrow at 11%. Chen currently has no debt, and its cost of equity is 18%. The tax rate is 31%. Chen will borrow $61,000 and use the proceeds to repurchase shares. What will the WACC be after recapitalization? a. 15.17% b. 17.15% c. Data are insufficient to formulate a response. d. 18% e. 11.17%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 7P

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