Attributes of mm proposition

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Johnson's Popcorn Enterprises is unlevered and is valued at $835,000.  Johnson's has decided that including debt in its capital structure would increase its value. Prior to including debt, the cost of equity is 7.5%. 

Johnson's has determined that issuing $235,000 of new debt at a 4.2% interest rate would be optimal. Johnson's would repurchase $235,000 of stock with the proceeds from the debt issue. Johnson's has a marginal tax rate of 38%. What will Johnson's new WACC be? Assume the attributes of MM Proposition II (with taxes) are at play.

Reference no: EM132066781

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