The nantucket nugget is unlevered and is valued at 640000, Ask an Expert

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The Nantucket Nugget is unlevered and is valued at $640,000. Nantucket is currently deciding whether including debt in its capital structure would increase its value. The current of cost of equity is 12%. Under consideration is issuing $300,000 in new debt with an 8% interest rate. Nantucket would repurchase $300,000 of stock with the proceeds of the debt issue. There are currently 32,000 shares outstanding and its effective marginal tax bracket is 34%. If cost of equity increases to 13.79%, what will Nantucket's new WACC be after debt issue?

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Financial Management, Finance

Category:- Financial Management
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