Question
Problem 1: 1- Arnell is a company that issued 30 million shares worth $ 15 each. In addition, it issued bonds for 150 million dollars.
Problem 1:
1- Arnell is a company that issued 30 million shares worth $ 15 each. In addition, it issued bonds for 150 million dollars. The cost of equity is 10% and the cost of debt is 5%. The corporate tax rate is 33%. What is the weighted average cost of capital (WACC) before and after tax?
2-RMEX has a market cap of $ 100 million and debt of $ 40 million. RMEX wishes to maintain the same capital structure in the future. The corporate tax rate is 33%. If the operating cash flow (FME) forecast by RMEX for next year is $ 7 million and their expected growth is 3% per annum ad infinitum. What is the after-tax weighted average cost of capital (WACC) of the RMEX business?
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