For each situation, calculate the WACC: a. Risk-free rate is 5 percent, expected market return is 11
Question:
For each situation, calculate the WACC:
a. Risk-free rate is 5 percent, expected market return is 11 percent, \(\beta\) is 0.75 , after-tax cost of debt capital is 5 percent, split between debt/equity capital is \(60 / 40\)
b. Risk-free rate is 5 percent, expected market return is 11 percent, \(\beta\) is 0.90 , after-tax cost of debt capital is 4 percent, split between debt/equity capital is 50/50
c. Risk-free rate is 5 percent, expected market return is 11 percent, \(\beta\) is 1.20 , after-tax cost of debt capital is 6 percent, split between debt/equity capital is \(20 / 80\)
d. Risk-free rate is 5 percent, expected market return is 11 percent, \(\beta\) is 0.00 , after-tax cost of debt capital is 6 percent, split between debt/equity capital is \(80 / 20\)
e. Risk-free rate is 5 percent, expected market return is 11 percent, \(\beta\) is 1.00 , after-tax cost of debt capital is 5 percent, split between debt/equity capital is \(60 / 40\)
Step by Step Answer:
Principles Of Engineering Economic Analysis
ISBN: 9781118163832
6th Edition
Authors: John A. White, Kenneth E. Case, David B. Pratt