Question: Please, help me with this problem. Could you explain it step by step? The ABC is unlevered and is valued at $640,000. ABC deciding including

Please, help me with this problem. Could you explain it step by step?

Please, help me with this problem. Could you explain it step by

The ABC is unlevered and is valued at $640,000. ABC deciding including debt in its capital structure would increase its value. The current cost of equity is 12%. Under consideration is issuing $300,000 in new debt with an 8% interest rate. ABC would repurchase $300,000 of stock with the proceeds of the debt issue. There are currently 32,000 shares outstanding and effective marginal tax bracket is zero. is currently whether 1) What will ABC's new WACC be? 2) Assume the effective marginal tax bracket is 34%. What will ABC's new WACC be? 3) Depict in a graph Modigliani-Miller view on the dependency between firm's capital structure and pre-tax WACC, WACC with taxes, equity cost of capital and debt cost of capital. Explain the shape of each curve

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