Question: Meyer & Co. expects its EBIT to be $151,000 every year forever. The firm can borrow at 6 percent. The company currently has no debt,

Meyer & Co. expects its EBIT to be $151,000 every year forever. The firm can borrow at 6 percent. The company currently has no debt, and its cost of equity is 13 percent and the tax rate is 22 percent. The company borrows $195,000 and uses the proceeds to repurchase shares.

A-

What is the cost of equity after recapitalization?

B-

What is the WACC?

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