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What will be johnson new cost of equity

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'Johnson and Sons' is a renowned brand for tools and equipment. The company currently finances its operations with $40 million in shares and $10 million in bonds. The required return on shares is 11% and required return on bonds is 6%. Assume that, the company issues $15 million worth of additional bonds at 8%. Using the proceeds from sale of the bonds, Johnson plans to retire $15 million worth of equity. Assuming the WACC remains the same, what will be Johnson's new cost of equity? (Assume zero taxes and perfect capital markets.)

Reference no: EM132554334

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