Question
A company is 40% financed by risk-free debt. The interest rate is 10%, the expected market risk premium is 8%, and the beta of the
| A company is 40% financed by risk-free debt. The interest rate is 10%, the expected market risk premium is 8%, and the beta of the companys common stock is .5. |
| a. | What is the company cost of capital? (Do not round intermediate calculations. Round your answer to 1 decimal place.) |
| Cost of capital | % |
| b. | What is the after-tax WACC, assuming that the company pays tax at a 35% rate? (Do not round intermediate calculations.) |
| After-tax WACC | % |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Mathematical Applications for the Management Life and Social Sciences
Authors: Ronald J. Harshbarger, James J. Reynolds
11th edition
9781337032247, 9781305465183, 1305108043, 1337032247, 1305465180, 978-1305108042
