Question: Question 2 (20 marks) Walker Inc. expects its annual EBIT to be around $100,000 perpetually. The firm can borrow at 11 percent. Walker currently has

Question 2 (20 marks) Walker Inc. expects its annual EBIT to be around $100,000 perpetually. The firm can borrow at 11 percent. Walker currently has no debt, and its cost of equity is 18 percent. The tax rate is 31 percent. Walker plans to borrow $61,000 and will use the proceeds to repurchase shares. What will the WACC be after recapitalization? (16 marks) b. How do you differentiate financial risks with business risks of a firm? (4 marks)

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