Question
NACC Calculation Weston's debt-to-equity ratio is 1.4, the company's WACC is 8.3%, and its debt-to-equity ratio is 5.4% The corporate tax rate is 35 percent.
NACC Calculation Weston's debt-to-equity ratio is 1.4, the company's WACC is 8.3%, and its debt-to-equity ratio is 5.4% The corporate tax rate is 35 percent. a. What is the capital cost of Weston? b. What is Weston's debt-free cost of equity capital? c. If the debt-to-equity ratio was 2, what would the cost of equity be? If the debt ratio is 1, what is it? The debt ratio How much is zero?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To calculate the various components of the NACC Net Aftertax Cash Flow calculation for Weston well need the following information DebttoEquity Ratio 14 WACC Weighted Average Cost of Capital 83 Tax Rate 35 a Capital Cost of Weston The capital cost of Weston can be calculated using the WACC formula The WACC is a weighted average of the cost of debt and the cost of equity based on the respective proportions of debt and equity in the capital structure WACC Weight of Debt Cost of Debt Weight of Equity Cost of Equity Given the debttoequity ratio we can calculate the weights of debt and equity as follows Weight of Debt DebttoEquity Ratio 1 ...
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
International Economics
Authors: Robert Carbaugh
18th Edition
0357518918, 978-0357518915
