What will target solutions new wacc be

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Problem 1: Target Solutions is unlevered and is valued at $640,000. Target is currently deciding whether including debt in its capital structure would increase its value. The current cost of equity is 12%. Under consideration is issuing $300,000 in new debt with an 8% interest rate. Target would repurchase $300,000 of stock with the proceeds of the debt issue. There are currently 32,000 shares outstanding and the marginal tax rate is 34%. What will Target's new WACC be? Assume the attributes of MM Proposition II with taxes are at play.

Reference no: EM132943662

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