Illustrate what will be bickley wacc with capital structure

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Reference no: EM13128657

Bickley Engineering Company has a capital structure of 30% Debt and 70% Equity. Its current Beta is 1.3, and its Market Risk Premium is 7.5% Points. The current Risk Free Rate is 3.5%. Bickley’s marginal tax rate is 40%.

What is the Unlevered Beta of Bickley?

Bickley’s management would like to change its capital structure to 15% Debt and 85% equity by retiring its bonds yielding 8%. The remaining long term debt will be at 7%. The marginal tax rate will remain the same.

What will be Bickley’s new Beta with this new 15/85 capital structure?

What is the WACC (Weighted Average Cost of Capital) of Bickely with its 30/70 capital structure? Bickley’s average borrowing rate with this capital structure is 7.5%.

What will be Bickley’s WACC with its 15/85 capital structure?

Reference no: EM13128657

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