Pennington airlines currently has a beta of 12 the companys

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Pennington Airlines currently has a beta of 1.2. The company's capital structure consists of $7 million of equity and $3 million of debt. The company is considering changing its capital structure by increasing its debt by $2 million and repurchasing common stock. After the plan is completed, the company will have $5 million of debt and $5 million of equity. The company estimates that if it goes ahead with the plan, its bonds will have a nominal YTM of 8.5%. The company's tax rate is 40%. The risk-free rate is 6% and the market risk premium is 7%. What is the company's estimated WACC if it recapitalizes?

Reference no: EM13391703

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