Question
Barn Company has a 6% cost of debt, a 40% debt-to-value ratio, and a 15% cost of equity. The marginal tax rate is 30%. What
Barn Company has a 6% cost of debt, a 40% debt-to-value ratio, and a 15% cost of equity. The marginal tax rate is 30%. What is Barn's WACC if it were 100% equity financed?
Answer Sheet is 11.40%, but how? If cost of equity is 15% and the company is 100% financed by equity, why isn't wacc = 15%?
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Budget Tools Financial Methods In The Public Sector
Authors: Greg G. Chen, Lynne A. Weikart, Daniel W. Williams
2nd Edition
1483307700, 9781483307701
