medium · Principles of Finance cost-of-capital-structure
A firm has $400 million in debt and $600 million in equity. The cost of equity is 12% and the after-tax cost of debt is 6%.
If the firm issues $100 million of new debt to buy back $100 million of equity, and the after-tax cost of debt and cost of equity remain the same, what is the new WACC?
- 10.20%
- 9.60%
- 9.00%
- 8.40%
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