An all-equity firm expects to incur depreciation expense of $0 and earn EBIT of $460,000 every...

  

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An all-equity firm expects to incur depreciation expense of $0 and earn EBIT of $460,000 every year, forever. Its cost of equity is 13 percent, and its tax rate is 23 percent. The firm has no debt, but is considering a recapitalization. If the firm borrows $850,000 at 6 percent per year, and uses the funds to repurchases shares, what will be the cost of equity after the recapitalization? A firm's unlevered cost of equity is 12.25%. The yield to maturity (YTM) on its debt is 5%, its debt-equity ratio is 1.3, and its tax rate is 21%. What is the firm's levered cost of equity? (Round your answer to the nearest one-hundredth of a percent. Do not enter the percentage symbol. For example, if your answer is 12.3456789%, enter 12.35. Do not worry if Canvas truncates trailing zeros.) An all-equity firm expects to incur depreciation expense of $0 and earn EBIT of $460,000 every year, forever. Its cost of equity is 13 percent, and its tax rate is 23 percent. The firm has no debt, but is considering a recapitalization. If the firm borrows $850,000 at 6 percent per year, and uses the funds to repurchases shares, what will be the cost of equity after the recapitalization? A firm's unlevered cost of equity is 12.25%. The yield to maturity (YTM) on its debt is 5%, its debt-equity ratio is 1.3, and its tax rate is 21%. What is the firm's levered cost of equity? (Round your answer to the nearest one-hundredth of a percent. Do not enter the percentage symbol. For example, if your answer is 12.3456789%, enter 12.35. Do not worry if Canvas truncates trailing zeros.)

Answer rating: 100% (QA)

To calculate the cost of equity after recapitalization we need to use the weighted average cost of c... View the full answer