Bruce & Co

Multiple Choice

Bruce & Co.expects its EBIT to be $100,000 every year forever.The firm can borrow at 11 percent.Bruce currently has no debt,and its cost of equity is 18 percent.The tax rate is 31 percent.Bruce will borrow $61,000 and use the proceeds to repurchase shares.What will the WACC be after recapitalization?

A) 16.30 percent
B) 16.87 percent
C) 17.15 percent
D) 18.29 percent
E) 18.86 percent