A company without debt has a WACC of 8%. The firm decides to go into debt at a rate of 5% to the tune of 33.3% (one third) of its value in order to finance a capital reduction of a similar amount. What is the cost of equity now? If the market risk premium is 4% and the of the shares was 1.2, what is the new of the shares after capital reduction?

Answer rating: 100% (QA)

To determine the new cost of equity and the new beta after the capital reduction we can use the info... View the full answer