Question
Market value balance sheet below (in millions). Net working capital= $550 Debt= $800 Long-term Assets= $2150 Equity= $1900 Value of Firm= $2700 =$2700 The debt
Market value balance sheet below (in millions).
Net working capital= $550 Debt= $800
Long-term Assets= $2150 Equity= $1900
Value of Firm= $2700 =$2700
The debt is yielding 7% and the cost of equity is 14%. The tax rate is 25%. Investors expect this level of debt to be permanent.
What is the WACC? If corporate tax rates increase to 45%, what is the new WACC? What does this say about the relationship between tax rates and WACC?
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Foundations In Personal Finance
Authors: Dave Ramsey
3rd Edition
1936948524, 978-1936948529
