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Q.6 Patty Inc. has a target debt ratio of 25% (debt/value). The debt has a before-tax cost of 6%. The rest of the funds are
Q.6 Patty Inc. has a target debt ratio of 25% (debt/value). The debt has a before-tax cost of 6%. The rest of the funds are from equity. The firm has a beta of 1.20. The T-bond rate is 2% and the market risk premium is 10%. What is the weighted average cost of capital (WACC) for the firm? Assume the tax rate is 20%.
| 9.90% | ||
| 10.20% | ||
| 11.60% | ||
| 10.80% | ||
| 12.00% | ||
| 11.70% |
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