Bruce & Co

question 24

Multiple Choice

Bruce & Co. expects its EBIT to be $165,000 every year forever. The company currently has no debt but can borrow at 8.6 percent while its cost of equity is 14.7 percent. The tax rate is 21 percent. The company is planning to borrow $55,000 and use the loan proceeds to repurchase shares. What will be the WACC after recapitalization?

• A) 14.57 percent
• B) 15.07 percent
• C) 14.51 percent
• D) 14.11 percent
• E) 14.58 percent

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Definitions:

Phonemes

The smallest units of sound in a language that can distinguish one word from another.

Meaningful Units

Segments of information that have been organized in a way that gives them significance or purpose, such as syllables within words or phrases within sentences.

Phonemes

The smallest unit of sound in a language that can distinguish words.

Grice's Maxim

A set of guidelines proposed by Paul Grice that describe how effective communication is achieved through cooperation, including the maxims of quantity, quality, relation, and manner.