2. Vactech Corp. 10pts Vastesh is a successful company, and it has substantial 'excess cash.' At this time, management w

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2 Vactech Corp 10pts Vastesh Is A Successful Company And It Has Substantial Excess Cash At This Time Management W 1 (70.81 KiB) Viewed 29 times

2. Vactech Corp. 10pts Vastesh is a successful company, and it has substantial 'excess cash.' At this time, management wants to alter Vastesh's (i) weighted average-cost-of-capital (WACC) and (ii) Vastesh's expected return on equity. Yastesh decides to pay a $100 million cash dividend to shareholders. Consider the table below. At present, Yastesh's expected equity return is 11% (Re), before the cash dividend. The pretax debt cost is 5% (Rd) under both scenarios, and the tax rate is 40%. Yastech, Millions Before Dividend Adjustments After Cash 150 (100) 50 300 300 Total Debt Net Debt 150 250 525 175 Equity Market Value Using the table above, and the formulas you have seen in class, what will be Yastech's (i) new equity return (new Re), and (ii) new after-tax WACC, after the cash dividend? To answer the questions, first, you will need to determine the company's pretax WACC before the payment of the dividend.