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Omega Corporation has 11.3 million shares outstanding, now trading at $52 per share. The firm has estimated the expected rate of return to shareholders at
Omega Corporation has 11.3 million shares outstanding, now trading at $52 per share. The firm has estimated the expected rate of return to shareholders at about 13%. It has also issued $185 million of long-term bonds at an interest rate of 10%. It pays tax at a marginal rate of 34%. a. What is Omega's after-tax WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) After-tax WACC b. What would WACC be if Omega used no debt at all? (Hint: For this problem you can assume that the firm's overall beta [BAl is not affected by its capital structure or by the taxes saved because debt interest is tax-deductible.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) WACC
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