The Ballarat Brewing Company (BBC) is currently an all equity firm with 1,000,000 shares outstanding...
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The Ballarat Brewing Company (BBC) is currently an all equity firm with 1,000,000 shares outstanding The company's weighted average cost of capital (WACC) is 10% pa and it has expected EBIT of $500,000 per year. BBC is considering raising $1 million in debt at a cost of 6% pa and using the proceeds to repurchase shares. a) Assuming no taxes, what is the value of The Ballarat Brewing Company before restructuring? b) Assuming no taxes, what is The Ballarat Brewing Company's required return on equity before the restructuring? c) Assuming no taxes, what is the value of The Ballarat Brewing Company after restructuring? d) What will be the company's debt-equity ratio after the restructuring? e) What is The Ballarat Brewing Company's required return on equity after the restructuring
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