here is the answer but i need the formula and in details from where we got each number to understand and solve it by my self please . i need to know how to find after tax cost of debt, beta, cost of equity and wacc.

You have been hired as a management consultant by AD Corporation to evaluate whether it has an appropriate amount of debt (the company is worried about a leveraged buyout). You have collected the following information on AD's current position: - There are 100,000 shares outstanding at $20/ share. The stock has a beta of 1.15 . - The company has $500,000 in long-term debt outstanding and is currently rated BBB. The current market interest rate is 10% on BBB bonds and 6% on treasury bonds. - The company's marginal tax rate is 40%. - Equity risk premium is 5.5%. 3 You proceed to collect the data on what increasing debt will do to the company's ratings: How much additional debt should the company take on assuming that the cash from new debt would not be used to buyback shares but to invest in projects with similar risk as the rest of the firm? Assuming that these projects are zero NPV projects. Answer: First, we calculate the unlevered beta =1.15/(1+0.6500/2000)=1. Next, the cost of capital at different levels of debt is given by For example, when the firm borrows additional $500,000, after-tax cost of deb is (10.4)10.5= 6.3%, the levered beta would be 1{1+(10.4)(500+500)/2000}=1.3, cost of equity would be 6+1.35.5=13.15%, and WACC would be 300010006.3+3000200013.15=10.87% The firm should take on additional $500,000 of debt. You have been hired as a management consultant by AD Corporation to evaluate whether it has an appropriate amount of debt (the company is worried about a leveraged buyout). You have collected the following information on AD's current position: - There are 100,000 shares outstanding at $20/ share. The stock has a beta of 1.15 . - The company has $500,000 in long-term debt outstanding and is currently rated BBB. The current market interest rate is 10% on BBB bonds and 6% on treasury bonds. - The company's marginal tax rate is 40%. - Equity risk premium is 5.5%. 3 You proceed to collect the data on what increasing debt will do to the company's ratings: How much additional debt should the company take on assuming that the cash from new debt would not be used to buyback shares but to invest in projects with similar risk as the rest of the firm? Assuming that these projects are zero NPV projects. Answer: First, we calculate the unlevered beta =1.15/(1+0.6500/2000)=1. Next, the cost of capital at different levels of debt is given by For example, when the firm borrows additional $500,000, after-tax cost of deb is (10.4)10.5= 6.3%, the levered beta would be 1{1+(10.4)(500+500)/2000}=1.3, cost of equity would be 6+1.35.5=13.15%, and WACC would be 300010006.3+3000200013.15=10.87% The firm should take on additional $500,000 of debt