Jobs & Education0 min ago
finance question
2 Answers
Rayburn Manufacturing is currenly an all-equity firm. The firms's equity is worth $2 million. The cost of that equity is 18%. Rayburn pays no taxes. Rayburn plans to issue $400,000 in debt and to use the proceeds to repurchase stock. The cost of debt is 10%.
a. After Rayburn repurchases the stock, what will the firms' overall cost of capital be?
b. After the repurchase, what will the cost of equity be?
Explain result in (b).
Answers
Best Answer
No best answer has yet been selected by REVIREB. Once a best answer has been selected, it will be shown here.
For more on marking an answer as the "Best Answer", please visit our FAQ.