In Problem 14, what is the cost of equity after recapitalization? What is the WACC? What are the implications for the firm’s capital structure decision?

Data from Problem 14

Cede & Co. expects its EBIT to be $92,600 every year forever. The firm can borrow at 7 percent. The firm currently has no debt, and its cost of equity is 14 percent. If the tax rate is 22 percent, what is the value of the firm? What will the value be if the firm borrows $165,000 and uses the proceeds to repurchase shares?