1. Farmington Company can borrow at 6.85 percent. The company currently has no debt and the cost of equity is 11.25 percent. The current value of the firm is $640,000. The corporate tax rate is 24 percent. What will the value be if the company borrows $355,000 and uses the proceeds to repurchase shares?

2. Garcia Company has no debt. Its cost of capital is 9.8 percent. Suppose the company converts to a debt-equity ratio of 1. The interest rate on the debt is 6.9 percent. Ignore taxes for this problem.

**What is the company’s new cost of equity?**

**Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.**

**What is its new WACC?**

**Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.**