Would its cost of equity change after the recapitalization

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1. A firm would like to borrow money to retire some of its outstanding equity. If the firm borrows at an interest rate of 0%, would its cost of equity change after the recapitalization? If so, would it be higher or lower compared to before the recapitalization? (Assume no taxes.)

2. Grossnickle Corporation issued 20-year, noncallable, 8.5% semi-annual coupon bonds at their par value of $1000 five years ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds? (how to calculate "N")

Reference no: EM131871684

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