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b Assuming you repurchase shares of stock with the money raised from the debt issuance, for
each capital structure, calculate the new cost of equity, WACC, value of operations, and the
amount of debt issued. What is the optimal capital structure for your boutique, and why?
c For the optimal capital structure, calculate the number of shares to be repurchased, the new
value of equity, and the new price per share.
d Suppose the tax rate on business income is lowered from to What is your new
optimal capital structure? Why does a lower tax rate have this effect on the use of debt
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