Question
A company has the following capital structure: D/E ratio = 0.42, Equity Beta = 1.04, Cost of Debt = 6.2%. The CEO proposes a new
A company has the following capital structure: D/E ratio = 0.42, Equity Beta = 1.04, Cost of Debt = 6.2%.
The CEO proposes a new leverage, expressed by a target D/E ratio of 0.71. What would be the firm's new WACC?
Assume that the marginal tax rate is 40%, risk-free rate is 3.7%, market risk premium is 4.9%, and that debt is risk less.
Enter your answer as a percentage, with 2 decimals, without the percentage "%" sign. For example, if you obtain an answer equal to 0.123456, that's 12.3456%, so enter 12.35.
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Investment Analysis and Portfolio Management
Authors: Frank K. Reilly, Keith C. Brown
10th Edition
538482109, 1133711774, 538482389, 9780538482103, 9781133711773, 978-0538482387
