Question
Assumptions: As you recall, the formula for WACC is: rWACC = (E/E+D) rE + D/(E+D) rD (1-TC) The formula for the required return on a
Assumptions:
As you recall, the formula for WACC is:
rWACC = (E/E+D) rE + D/(E+D) rD (1-TC)
The formula for the required return on a given equity investment is:
ri= rf + i * (RMkt-rf)
RMkt-rf is the Market Risk Premium. For this project, you may assume the Market Risk Premium is 5% unless you can develop a better number.
rf is the risk-free rate. The risk-free rate is normally the yield on US Treasury securities such as a 10-year treasury. For this assignment, please use 3.5%.
You may assume a corporate tax rate of 40%.
Please do the following a r
report that contains the following elements:
Your calculated WACC
How data was used to calculate WACC (provide the formula and the formula with your values substituted)
Sources for your data
A discussion of how much confidence you have in your answer, including what the limiting assumptions you made were, if any
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