Bruce & Co. expects its EBIT to be $75,000 every year forever. The company can borrow...

Bruce & Co. expects its EBIT to be $75,000 every year forever. The company can borrow at 10 percent. The company currently has no debt, its cost of equity is 14 percent, and the tax rate is 35 percent. The company borrows $152,000 and uses the proceeds to repurchase shares.

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.)

Cost of equity

%

What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

WACC

%

Expert Solution

jeff jeffy answered 1 year ago

Bruce & Co. expects its EBIT to be $100,000 every year forever. The firm can borrow...

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

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