A utility’s capital structure is 60% debt (with a 4% pre-tax cost of capital) and 40% equity (with a 9.5% after-tax cost of capital) and a 20% tax rate. The utility is building a 750 MW combined-cycle gas plant for $500 million with a 30-year useful life. The combined-cycle gas plant has a capacity factor of 65% and estimated annual O&M costs of $10 million. 

What is the utility’s pre-tax WACC?

Answer rating: 100% (QA)

We can calculate the utilitys pretax WACC using the following formula WACC EV Re DV Rd 1 Tc ... View the full answer