Rumolt Motors has 30 million shares outstanding with a price of $15 per share. In addition, Rumolt
Question:
Rumolt Motors has 30 million shares outstanding with a price of $15 per share. In addition, Rumolt has issued bonds with a total current market value of $150 million. Suppose Rumolt’s equity cost of capital is 10%, and its debt cost of capital is 5%.
a. What is Rumolt’s pretax WACC?
b. If Rumolt’s corporate tax rate is 21%, what is its after-tax WACC?
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Plan We can use Eq 162 to compute the firms WACC Execute a E 15 30 4...View the full answer
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Related Book For 
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
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