PartialQuestion 2

0.83 / 2.5 pts

A firm is solely financed by equity with market value of $50,000 and cost of equity of 10%. It wishes to raise another $30,000 via corporate bonds with cost of debt of 5% and use all of it to buy back outstanding equity (no cash holding). Hold investment policies fixed. In a MM world with tax rate of 40%,

1. The cost of equity after debt is raised is %.
2. The additional value created by debt is $ .
3. The WACC after debt is raised is %.

Answer 1:

12.81

Answer 2:

12000

Answer 3:

8.06

please provide the correct answer, not sure what part is wrong