A firm is worth $50 million and has a cost of capital of 15%. It is all equity financed. If the firm sells $25 million of debt with a 7% promised return and uses it to repurchase part of the firm's
Stock, what will the firm's cost of capital then be?

Question

Quizplus · Accepted Answer

The Answer of A firm is worth $50 million and has a cost of capital of 15%. It is all equity financed. If the firm sells $25 million of debt with a 7% promised return and uses it to repurchase part of the firm's
Stock, what will the firm's cost of capital then be?

A Firm Is Worth $50 Million and Has a Cost