Business, 16.08.2020 01:01 Aidanme25

Problem 16-15 MM and Taxes [LO2] Meyer & Co. expects its EBIT to be $111,000 every year forever. The firm can borrow at 8 percent. The company currently has no debt, and its cost of equity is 12 percent and the tax rate is 22 percent. The company borrows $165,000 and uses the proceeds to repurchase shares. a. What is the cost of equity after recapitalization? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.) b. What is the WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.)

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Problem 16-15 MM and Taxes [LO2] Meyer & Co. expects its EBIT to be $111,000 every year forever....