What is the value of the firm in current capital structure

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Company G expects its EBIT to be $92,000 every year forever. The firm can borrow at 9%. It currently has no debt, and its cost of equity is 25%. The tax rate is 35%. The firm is considering borrowing $ 60,000 in debt to achieve a new capital structure.

a) What is the value of the firm in current capital structure?

b) What will the value be if the company borrows $60,000 and uses the proceeds to repurchase shares?

c) What is the cost of equity after the change of capital structure?

d) What is its WACC after the change of capital structure?

Reference no: EM132406444

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