Finding the debt-equity ratio

Reference no: EM131924131

Question: A $200 million equity only company wants to restructure itself with a mix of equity and debt. It can borrow up to $100 million at a pre-tax cost of 15%. Its current cost of equity is 20%. Ignoring taxes, calculate the company's value, new cost of equity and WACC when it:

a. Has a debt/equity ratio of 0.5000

b. Has a debt/equity ratio of 1.0000

Reference no: EM131924131

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