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Assume that shares could be repurchased at the current market price of $25 per share. Calculate CD’s expected EPS and TIE at debt levels of $0, $250,000, $500,000, $750,000, and $1,000,000. How many shares would remain after recapitalization under each scenario?
Sales (last year) $1,100,000
Variable costs as a % of sales 60%
Fixed costs $40,000
Total capital $2,000,000
Shares outstanding 80,000
Current stock price $25
BVPS $25
Tax rate 25%
rRF 7.50%
RPM 6.00%
βu 1.25
WACC = rs
WHAT IS THE WACC=rs?
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