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1. Shows a simplified balance sheet for Rensselaer Felt. Calculate this companyâs weighted-average cost of capital. The debt has just been refinanced at an interest rate of 6% (short term) and 8% (long term). The expected rate of return on the companyâs shares is 15%. There are 7.46 million shares outstanding, and the shares are trading at $46. The tax rate is 35%.2. How will Rensselaer Feltâs WACC and cost of equity change if it issues $50 million in new equity and uses the proceeds to retire long-term debt? Assume the companyâs borrowing rates are unchanged. Use the three-step procedure.
