What is net cost of equity

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The NFT Company expects perpetual earnings before interest and taxes (EBIT) of $55 million per year. The firm's after-tax all-equity discount rate is 15%. NET is subject to a corporate tax rate of 40%. The pre-tax annual cost of the firm's debt is 3.5%, and the firm has $25 million of debt.

a. What is NFT's value?
b. What is NET's cost of equity?
c. What is NFT's weighted average cost of capital (WACC)?
d. NFT is considering raising new capital through the primary market. The flotation costs of debt and equity are 1.5% and 2% respectively. What is the updated WACC (i.e., Marginal Cost of Capital -> MCC)?

Reference no: EM133003649

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