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ABC Company WACC E(r M ) 10% Cost of debt, r D 8% Corporate tax rate, T C 30% Cov(r Abby ,r M ) 0.13
ABC Company WACC
E(rM) 10%
Cost of debt, rD 8%
Corporate tax rate, TC 30%
Cov(rAbby,rM) 0.13
Debt, D 1,500,000
Var(rM) 0.11
Risk-free rate, rf 3%
Equity, E 3,000,000
a) Finding the company cost of equity.
Equity beta, ?
Cost of equity, rE ?
b)Finding the company WACC.
V=D+E ?
WACC ?
c) After the IPO, the company's equity is the number of shares multiplied in the share's market value.
Therefore:
Equity (new), E ?
Finding the company WACC.
V=D+E ?
WACC ?
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