Question
Rumolt Motors has 11 million shares outstanding with a price of $54 per share. In addition, Rumolt has issued bonds with a total current market
Rumolt Motors has 11 million shares outstanding with a price of $54 per share. In addition, Rumolt has issued bonds with a total current market value of $594 million. Suppose Rumolt's equity cost of capital is 10%, and its debt cost of capital is 6%.
a. What is Rumolt's pretax weighted average cost of capital?
b. If Rumolt's corporate tax rate is 28%, what is its after-tax weighted average cost of capital?
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Personal Finance
Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes
11th edition
9781259278617, 77861647, 1259278611, 978-0077861643
