Calculate the appropriate after-tax discount rate

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1. You need to have $2,000,000 in your retirement account in 40 years.  If you start investing today and can earn 9 percent annual return, calculate your monthly contribution needed to reach your goal.

2. Calculate the appropriate after-tax discount rate: tax rate on comparable risk investment: 35%; investor's before-tax opportunity cost: 15%; capitalization rate: 8%.

3. Bruce & Co. expects its EBIT to be $149,000 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 34 percent. Bruce will borrow $61,000 and use the proceeds to repurchase shares. What will the WACC be after recapitalization?

a) 18.29 percent

b) 17.34 percent

c) 18.57 percent

d) 16.87 percent

e) 18.86 percent

Reference no: EM131924174

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