What is the cost of equity

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Springvale Corp. has EBIT of $25 million, before tax cost of debt of 9%, an unlevered cost of equity of 12%, a tax rate of 35% and debt of $75 million.

a) What is the cost of equity?

b) What is the WACC? 

c) Suppose that the firm changes its capital structure so that the debt = $100 million

i. What will happen to the cost of equity under the new capital structure?

ii. What will happen to the WACC?

Reference no: EM132413507

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