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Market Value of Equity and WACC

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Market Value of Equity: $2,000,000.00
Cost of unlevered equity: 18.00%
Cost of debt: 10.00%
Planned issuance of debt: $400,000.00

A - After Rayburn repurchases the stock, what will the firm's WACC be?
B - After the repurchase, what will the cost of equity be?  Explain.

C - Use your answer to (b) to compute Rayburn's WACC after the repurchase.  Is this answer consistant with (a)?

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Solution Summary

Market Value of Equity and WACC are noted.

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