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What is the cost of equity after recapitalization

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Question - Cede & Co. expects its EBIT to be $54,000 every year forever. The firm can borrow at 6 percent. The firm currently has no debt, its cost of equity is 10 percent, and the tax rate is 35 percent. Assume the firm borrows $151,000 and uses the proceeds to repurchase shares.

Required -

1. What is the cost of equity after recapitalization?

2. What is the WACC?

Reference no: EM133043136

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