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# Rayburn Manufacturing Inc- Repurchase of Stock

Rayburn Manufacturing Inc

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)?

#### Solution Preview

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)?

A - After Rayburn repurchases the stock, what will the firm's WACC be?

The ...

#### Solution Summary

The solution calculates the firm's WACC and the cost of equity after the repurchase of stock

\$2.19