Corning Inc. currently has a capital structure of 20 percent debt and 80 percent equity, but...
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Corning Inc. currently has a capital structure of 20 percent debt and 80 percent equity, but is considering a new product that will be produced and marketed by a separate division. The new division will have a capital structure of 58 percent debt and 42 percent equity. Corning has a current beta of 1.4, but is not sure what the beta for the new division will be. Ball Corporation is a firm that produces a product similar to the product under consideration by Corning. Ball has a beta of 1.6, a capital structure of 25 percent debt and 75 percent equity and a marginal tax rate of 40 percent. Corning's tax rate is 35 percent. What will be Corning's weighted average cost of capital for this new division if the after-tax cost of debt is 12 percent, the risk-free rate is 5 percent, and the market risk premium is 10 percent? 14.37% 17.25% 19.69% 10.56% Corning Inc. currently has a capital structure of 20 percent debt and 80 percent equity, but is considering a new product that will be produced and marketed by a separate division. The new division will have a capital structure of 58 percent debt and 42 percent equity. Corning has a current beta of 1.4, but is not sure what the beta for the new division will be. Ball Corporation is a firm that produces a product similar to the product under consideration by Corning. Ball has a beta of 1.6, a capital structure of 25 percent debt and 75 percent equity and a marginal tax rate of 40 percent. Corning's tax rate is 35 percent. What will be Corning's weighted average cost of capital for this new division if the after-tax cost of debt is 12 percent, the risk-free rate is 5 percent, and the market risk premium is 10 percent? 14.37% 17.25% 19.69% 10.56%
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To calculate the weighted average cost of capital WACC for the new division of Corning Inc well foll... View the full answer
Related Book For
Contemporary Financial Management
ISBN: 9780324289114
10th Edition
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow
Posted Date:
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