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You currently own 600 shares of JKL, Inc. JKL is an all-equity firm that ha hare. The company's earnings before interest and taxes are $140,000. J This debt will be used to repurchase shares of stocck. ) If the cost of equity is 25%, the WACC is 16% and cost of debt is 10%, v

You currently own 600 shares of JKL, Inc. JKL is an all-equity firm that ha hare. The company's earnings before interest and taxes are $140,000. J This debt will be used to repurchase shares of stocck. ) If the cost of equity is 25%, the WACC is 16% and cost of debt is 10%, v

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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You currently own 600 shares of JKL, Inc. JKL is an all-equity firm that has 75,000 shares of stock outstanding at a market price of $40 a share. The company's earnings before interest and taxes are $140,000. JKL has decided to issue $1 million of debt at 8 percent interest. This debt will be used to repurchase shares of stocck. b) If the cost of equity is 25%, the WACC is 16% and cost of debt is 10%, what will be the implied D/E ratio?
Transcribed Image Text:You currently own 600 shares of JKL, Inc. JKL is an all-equity firm that has 75,000 shares of stock outstanding at a market price of $40 a share. The company's earnings before interest and taxes are $140,000. JKL has decided to issue $1 million of debt at 8 percent interest. This debt will be used to repurchase shares of stocck. b) If the cost of equity is 25%, the WACC is 16% and cost of debt is 10%, what will be the implied D/E ratio?
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