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WACC

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A corporation is unlevered and is valued at $640,000. The corporation is currently deciding whether including debt in its capital structure would increase its value. The current of cost of equity is 12%. Under consideration is issuing $300,000 in new debt with an 8% interest rate. The corporation would repurchase $300,000 of stock with the proceeds of the debt issue. There are currently 32,000 shares outstanding and its effective marginal tax bracket is 34%. What will the corporation's new WACC be?

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New Debt Proporiton = 300,000/(640,000) = 0.47
New Equity Proportion = ...

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