Question: Bruce & Co. expects its EBIT to be $42,000 every year forever. The company can borrow at 6 percent. The company currently has no debt,

Bruce & Co. expects its EBIT to be $42,000 every year forever. The company can borrow at 6 percent. The company currently has no debt, its cost of equity is 10 percent, and the tax rate is 35 percent. The company borrows $108,000 and uses the proceeds to repurchase shares.

What is the company's WACC?

What is the cost of equity after recapitalization?

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