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What are implications for firm capital structure decision

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Reference no: EM131994000

Elzear & Co. has a market value of $408,333 and its cost of equity is 12 percent. The firm can borrow at 7 percent but currently has no debt. If the tax rate is 35 percent, what is the value of the firm? What will the value be if the company borrows $125,000 and uses the proceeds to repurchase shares? what is the cost of equity after recapitalization? What is the WACC? What are the implications for the firm's capital structure decision?

Reference no: EM131994000

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