Springvale Corp. has EBIT of $25 million, before tax cost of debt of 9%, an unlevered cost
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Question:
Springvale Corp. has EBIT of $25 million, before tax cost of debt of 9%, an unlevered cost of equity of 12%, a tax rate of 35% and debt of $75 million.
a) What is the cost of equity?
b) What is the WACC?
c) Suppose that the firm changes its capital structure so that the debt = $100 million
i. What will happen to the cost of equity under the new capital structure?
ii. What will happen to the WACC?
Related Book For
Business Law and the Legal Environment
ISBN: 978-1285860381
7th edition
Authors: Susan S. Samuelson, Jeffrey F. Beatty
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