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ValentinkaMS [17]
3 years ago
15

Braxton Corp. has no debt but can borrow at 6.7 percent. The firm’s WACC is currently 8.5 percent, and the tax rate is 35 percen

t.
a. What is the company’s cost of equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity %
b. If the firm converts to 20 percent debt, what will its cost of equity be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity %
c. If the firm converts to 40 percent debt, what will its cost of equity be?
d. If the firm converts to 20 percent debt, what is the company’s WACC?
e. If the firm converts to 40 percent debt, what is the company’s WACC?
WACC___%.

Business
1 answer:
Dmitry [639]3 years ago
4 0

Answer

The answer and procedures of the exercise are attached in the image below.  

Explanation  

Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.  

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Missing word <em>"Because the stock will be sold directly to an investor, there is no spread; the other flotation costs are insignificant"</em>

<em />

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Fair Price = Current Value of Business/Number of Outstanding Shares

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