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Myers Corporation is currently all equity financed and has a value of $90 million
Myers Corporation is currently all equity financed and has a value of $90 million. Investors currently require a return of 16.6 percent on common stock. Myers has a marginal tax rate of 30 percent. Myers plans to issue $40 million of debt with a return of 8.1 percent and use the proceeds to repurchase common stock.
a?What will be the value of the firm after the debt issue? Please state your answer in millions rounded to two decimal places.
b) Given that the value of the firm after the debt issue will be $102 million, what will be the value of the equity after the debt issue? Please state your answer in millions rounded to two decimal places.
c) Given that the value of the equity after the debt issue will be $62 million, what will be the expected return on the stock after the debt issue? Enter your answer as a percentage and round to 2 decimal places. Do not enter the percentage sign as part of your answer.
d) Given that the expected return on the stock after the debt issue will be 20.44%, what will be the Weighted Average Cost of Capital after the debt issue? Do not enter the percentage sign as part of your answer.
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