An unlevered company with a cost of equity of 14.25% is considering borrowing $1,600,000. The borrowed funds would be used to repurchase shares. EBIT is expected to be $600,000 every year indefinitely. Assume all the M&M assumptions are satisfied and all available earnings are immediately distributed to common shareholders. According to M&M Proposition I without taxes, what will be this company's WACC if it proceeds with the capital restructuring?

Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit the % sign in your response. For example, an answer of 15.39% should be entered as 15.39.

Answer rating: 100% (QA)

Solution An unlevered company with a cost of equity of 1425 is considering borrowing S1600000 The bo... View the full answer