Meyer & Co. expects its EBIT to be $97,000 every year forever. The firm can borrow...

Meyer & Co. expects its EBIT to be $97,000 every year forever. The firm can borrow at 8 percent. The company currently has no debt, and its cost of equity is 13 percent and the tax rate is 24 percent. The company borrows $195,000 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.)

company has no debt

a. cost of equity: %

b. WACC %

Expert Solution

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jeff jeffy answered 1 year ago

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