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1. Firm and Project WACC Suppose a firm has the following balance sheet. The firm's pre-tax cost of debt is 5%, the cost of equity
1. Firm and Project WACC Suppose a firm has the following balance sheet. The firm's pre-tax cost of debt is 5%, the cost of equity is 12%, and the firm faces a tax rate of 21%. Long-term debt consists of 450 bonds that currently trade at a price of $975. Common equity consists of 300,000 shares of common stock with a par value of \$1 and currently trade at a price of \$1.50. 1. What is the market value of the firm's debt? 2. What is the market value of the firm's equity? 3. What is the firm's proportion of debt financing? 4. What is the firm's proportion of equity financing? 5. What is the firm's WACC? Suppose the firm wants to raise $500,000 million to fund a project. Calculate the WACC assuming the pre-tax cost of debt is 5% and the cost of equity is 12%. 6. What is the project's WACC if the firm raises capital through 50% debt financing and 50% equity financing? 1. Firm and Project WACC Suppose a firm has the following balance sheet. The firm's pre-tax cost of debt is 5%, the cost of equity is 12%, and the firm faces a tax rate of 21%. Long-term debt consists of 450 bonds that currently trade at a price of $975. Common equity consists of 300,000 shares of common stock with a par value of \$1 and currently trade at a price of \$1.50. 1. What is the market value of the firm's debt? 2. What is the market value of the firm's equity? 3. What is the firm's proportion of debt financing? 4. What is the firm's proportion of equity financing? 5. What is the firm's WACC? Suppose the firm wants to raise $500,000 million to fund a project. Calculate the WACC assuming the pre-tax cost of debt is 5% and the cost of equity is 12%. 6. What is the project's WACC if the firm raises capital through 50% debt financing and 50% equity financing
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