Weighted-average cost of capital at new capital structure

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Whispering Pines, Inc., is all-equity-financed. The expected rate of return on the company’s shares is 11.75%.

Suppose the company issues debt, repurchases shares, and moves to a 29% debt-to-value ratio (D/V = .29). What will be the company’s weighted-average cost of capital at the new capital structure? The borrowing rate is 7.25% and the tax rate is 40%. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Weighted-average cost of capital             %

Reference no: EM131556045

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