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Cede & Co. expects its EBIT to be $82125 every year forever. The firm can borrow...

Cede & Co. expects its EBIT to be $82125 every year forever. The firm can borrow at 9%. Cede currently has no debt, and its cost of equity is 22%. The tax rate is 35%. What is the firm’s cost of equity capital after borrowing $45,000 and using the proceeds to repurchase shares (i.e., after recapitalization)? (Answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations.)

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Answer #1

cost of equity is 25.68 after debt taken.

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