Cost of equity capital under the proposed restructuring

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Reference no: EM13943608

Ngala Ltd. currently has no debt in their capital structure. They are considering recapitalizing the firm and adding about 25% debt. The loan requires an interest rate of 7%. The firm is in the 35% tax bracket. Currently, the firm has a beta of 1.02. Treasuries are currently yielding 1.5% and the S&P 500’s recent historical return has averaged about 9.50%. What will be the impact to the firm if the restructuring proceeds? a. Determine the current cost of capital. b. Determine the levered beta under the proposed restructuring. c. Determine the cost of equity capital under the proposed restructuring. d. Determine the WACC under the proposed restructuring.

Reference no: EM13943608

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