S˜ao Paolo Foods (introduced in Question 1) is considering a

S˜ao Paolo Foods (introduced in Question 1) is considering a leveraged recapitalization of the company. Upon announcement, management expects the share price to rise by 10 percent. If the company raises R$200 million in new debt to repurchase shares, how many shares can the company repurchase? Assuming management will actively manage to the new capital structure, estimate the company's new market beta. If the company's cost of
debt rises to 100 basis points above the Brazilian risk-free rate, what will its new cost of capital equal?
Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...


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