Olympic Lanes is currently worth 5 million dollars and is all equity-financed. The company's current cost of equity is 10% Olympic Lanes would like to issue debt worth 1 million dollars with a cost of debt of 5%. Assuming the Modigliani-Miller Theories hold perfectly, what will Olympic Lanes' new cost of equity be after issuing the debt?

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A: Weighted Average cost of Capital (WACC) is the average cost of capital of the firm's existing…

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A: a)  Computation:

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A: In this we need return on equity after the repurchase of shares.

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