Question: Cede & Co. expects its EBIT to be $51,000 every year forever. The firm can borrow at 7 percent. The firm currently has no debt,

Cede & Co. expects its EBIT to be $51,000 every year forever. The firm can borrow at 7 percent. The firm currently has no debt, its cost of equity is 10 percent, and the tax rate is 35 percent. Assume the firm borrows $145,000 and uses the proceeds to repurchase shares.

What is the cost of equity after recapitalization?

What is the WACC?

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