Question
Parsley Inc was an all-equity-financed firm generating $3M EBIT every year. It decided to issue $2.24M worth of bonds and use proceeds to buy back
Parsley Inc was an all-equity-financed firm generating $3M EBIT every year. It decided to issue $2.24M worth of bonds and use proceeds to buy back some shares. Before issuing debt the required return on its assets was 9%, the marginal tax rate is 21% and it placed bonds with 4.5% coupon rate. Assume that the risk-free rate is 1% and MRP is 6%.
What is its WACC after issuing debt? [give your answer in %, with two decimal points precision]
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Healthcare Finance An Introduction To Accounting And Financial Management
Authors: Louis Gapenski PhD
3rd Edition
1567932320, 978-1567932324
