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linda_us, Master's Degree
Category: Single Problem
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# 1. Currently, Meyers Manufacturing Enterprises (MME) has a

### Customer Question

1. Currently, Meyers Manufacturing Enterprises (MME) has a capital structure consisting of 35% debt and 65% equity. MME's debt currently has a 7% yield to maturity. The risk-free rate (rRF) is 5%, and the market risk premium (rM – rRF) is 6%. Using the CAPM, MME estimates that its cost of equity is currently 11.6%. The company has a 40% tax rate.
MME's financial staff is considering changing its capital structure to 45% debt and 55% equity. If the company went ahead with the proposed change, the yield to maturity on the company's bonds would rise to 7.5%. The proposed change will have no effect on the company's tax rate.
A. What would be the company's new cost of equity if it adopted the proposed change in capital structure? Round your answer to 2 decimal places. Do not round intermediate calculations.--------%
B. What would be the company's new WACC if it adopted the proposed change in capital structure? Round your answer to 2 decimal places. Do not round intermediate calculations.--------%
Submitted: 1 year ago.
Category: Single Problem
Expert:  F. Naz replied 1 year ago.
Please accept the offer so the answer may be provided in next 24 hours, thanks.
Customer: replied 1 year ago.
i already submit the assignment,the deadline was 10pm and i state 9pm,so next time.
Expert:  F. Naz replied 1 year ago.
Okay better luck next time, take care.