Oconnell amp co expects its ebit to be 95000 every year


O'Connell & Co. expects its EBIT to be $95,000 every year forever. The firm can borrow at 8 percent. O'Connell currently has no debt, and its cost of equity is 13 percent and the tax rate is 35 percent. The company borrows $133,000 and uses the proceeds to repurchase shares.

What is the cost of equity after recapitalization?

 

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Finance Basics: Oconnell amp co expects its ebit to be 95000 every year
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