Question: Rendezvous Ltd . expects its EBIT to be $ 1 0 0 , 0 0 0 every year forever. The firm can borrow at 1

Rendezvous Ltd. expects its EBIT to be $100,000 every year
forever. The firm can borrow at 11 percent. Bruce currently has
no debt, and its cost of equity is 18 percent. The tax rate is
31 percent. Bruce will borrow $61,000 and use the proceeds to
repurchase shares. What will the WACC be after recapitalization?
(5 marks)
b) Provide at least two circumstances, where interest tax-shield
will have no value for a company

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