In Problem 23, what is the cost of equity after recapitalization? What is the WACC? What are the implications for the firm’s capital structure decision?

Problem 23,

Bruce & Co. expects its EBIT to be £100,000 every year forever. The firm can borrow at 10 per cent. Bruce currently has no debt, and its cost of equity is 20 per cent. If the tax rate is 21 per cent, what is the value of the firm? What will the value be if Bruce borrows £80,000 and uses the proceeds to repurchase shares?