Problem

M&M. Kunitz Co. has no debt. Its cost of capital is 9.3 percent. Suppose Kunitz conver...

M&M. Kunitz Co. has no debt. Its cost of capital is 9.3 percent. Suppose Kunitz converts to a debt-equity ratio of 1.0. The interest rate on the debt is 6.4 percent. Ignoring taxes, what is the company’s new cost of equity? What is its new WACC?

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Solutions For Problems in Chapter 13