Weighted-average cost of capital at new capital structure

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Reference no: EM13850583

Whispering Pines, Inc. is all-equity-financed. The expected rate of return on the shares is 12%. Calculate the opportunity cost of capital for an average-risk Whispering Pines investment. Next, suppose the company issue debt, repurchases shares, and moves to a 30% debt to value ratio (D/V=.30). Calculate the company’s weighted-average cost of capital at the new capital structure. The borrowing rate is 7.5% and the tax rate is 35%.

Based on the WACC calculation, provide a one –to -two page papers summarizing your recommendations for Whispering Pines.

You should show all calculations for the assignment. In addition to the required text, provide at least one scholarly reference to support your answer.

Reference no: EM13850583

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