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3. hi my teacher asks me to apply modigilani and miller...

# Question: hi my teacher asks me to apply modigilani and miller...

###### Question details

Hi, my teacher asks me to apply Modigilani and Miller theory in 1963 to do this task, I read it but still did not know how to do this task. Can you help?

Test company is an all equity financed business. The current weighted average cost of capital (WACC) is 8%. The earning before interest and tax (EBIT) is $1,562,500. The manager intends to apply for a loan of$1,000,000 to buy back a part of its current ordinary shares outstanding. With the tax rate of 30%. What is the new WACC?