Bruce & Co. expects its EBIT to be $165,000 every year forever. The company currently has no debt but can borrow at 8.6 percent while its cost of equity is 14.7 percent. The tax rate is 21 percent. The company is planning to borrow $55,000 and use the loan proceeds to repurchase shares. What will be the WACC after recapitalization? Multiple Choice 15.07 percent 14.11 percent 14.51 percent 14.58 percent 14.57 percent

14.33%

Explanation:

WACC is the average cost of capital of the firm based on the weightage of the debt and weightage of the equity multiplied to their respective costs.

According to WACC formula

WACC = ( Cost of equity x Weightage of equity ) + ( Cost of debt ( 1- t) x Weightage of debt )

First Calculate the Weightage

Market Value of Shares = EBIT / cost of equity = $165,000 / 14.7% = $1,122,449

Value of Debt = $55,000

Total = $1,122,449 + $55,000 = $1,177,449

Weightage

Equity =  $1,122,449 / $1,177,449 = 0.9533

Debt = 0.0467

Placing values in the WACC formula

WACC = ( 14.7% x 0.9533 ) + ( 8.6% ( 1 - 0.21 ) x 0.0467 )

WACC = 14.01% + 0.32% = 14.33%

the correct answer would be b, when, queen, calder hall and london.

explanation:

we always capitalize words when a paragraph or sentence is starting, when an important name is used, when a place is being written, or simply when a noun is used, etc. so in this sentence, sentence is starting from 'when', so it will be written in capital letters. secondly, queen is considered to be an important person, so it will also be written in capital letter. next, the name of the town is mentioned, i-e calder hall, which will also be written in capital letters. in the last,   city name is being used, 'london', which will also be written in capital letters. so option b is the most appropriate one.