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What is the cost of equity after recapitalization

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Question - Bruce & Co. expects its EBIT to be $85,000 every year forever. The firm can borrow at 11 percent. Bruce currently has no debt, and its cost of equity is 18 percent. If the tax rate is 35 percent, what is the value of the firm? What will the value be if Bruce borrows $60,000 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: EM132572177

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