Saz Inc. is a swimming pool supply company that is currently unlevered with a P/E ratio of 12. The company has no growth prospects. The tax rate is 35 per cent.What is Sazâ€s cost of capital?Stagnant is considering adopting a new capital structure with 50 per cent debt. It has consulted with a bank which is willing to lend at a 5 per cent rate. What will be the new return on equity, WACC and P/E ratio?
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