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Choose option a,b,c,d,e for the following: Question 4 – Chen and Co. expect its EBIT to be $100,000 every year forever. The firm can borrow at 11%. Chen currently has no debt, and its cost of equity is 18%. The tax rate is 31%. Chen will borrow $61,000 and use the proceeds to repurchase shares. What will the WACC be after recapitalization? a. 15.17% b. 17.15% c. Data are insufficient to formulate a response. d. 18% e. 11.17%

Choose option a,b,c,d,e for the following: Question 4 – Chen and Co. expect its EBIT to be $100,000 every year forever. The firm can borrow at 11%. Chen currently has no debt, and its cost of equity is 18%. The tax rate is 31%. Chen will borrow $61,000 and use the proceeds to repurchase shares. What will the WACC be after recapitalization? a. 15.17% b. 17.15% c. Data are insufficient to formulate a response. d. 18% e. 11.17%

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Choose option a,b,c,d,e for the following:

Question 4 –

Chen and Co. expect its EBIT to be $100,000 every year forever. The firm can borrow at 11%. Chen currently has no debt, and its cost of equity is 18%. The tax rate is 31%. Chen will borrow $61,000 and use the proceeds to repurchase shares. What will the WACC be after recapitalization?

a. 15.17%

b. 17.15%

c. Data are insufficient to formulate a response.

d. 18%

e. 11.17%

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