Question
1 ) Calculate Wacc of company x based on the followingg information. Beta of the stock 1.4 ,T bill rate 6% ,market risk preium 9,
1 ) Calculate Wacc of company x based on the followingg information.
Beta of the stock 1.4 ,T bill rate 6% ,market risk preium 9, yield to maturity on lt debt 5%, book value of equity 500 million ,market value of equity 650 million, long term debt outstanding 480 million ,corporate tax 21% .
2)
| security type | capital structure | Required rate of return |
| debt | D=385.7 D/V =0.243 | Rdebt = 0.09 or 9% |
| common stock | E=1,200.0 E/V=0.757 | Requity =0.12 or 12% |
| total | V=1.585.7 |
Based on the information given above: a. Calculate companys WACC. b. If the company is excused from paying taxes, what would be its WACC? c. Suppose after being excused from paying taxes, company makes a large issue and pays all its debt with the proceeds. What would be the cost of capital of the company?
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Core Concepts Of Accounting Information Systems
Authors: Nancy A. Bagranoff, Mark G. Simkin, Carolyn Strand Norman
11th Edition
9780470507025, 0470507020
