Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose Dell Inc is currently has a debt to equity ratio of 1:2. The cost of debt is 5%, the cost of equity is 16%,
Suppose Dell Inc is currently has a debt to equity ratio of 1:2. The cost of debt is 5%, the cost of equity is 16%, and the tax rate is 20%. What is the WACC for Dell? (Hint: For D/E ratio of 1:2, you can assume MVD = 1 and MVE = 2 to do this calculation.) O 12% 12.33% O 16% 10.2% QUESTION 8 Given Q7: If Dell had no debt and was 100% equity financed, what would the cost of equity (r_e)? aswer in %. Ex for .6789 put 67.89% 12% QUESTION 9 Given Q7: Next, suppose Dell wants to change its capital structure and move to a debt to equity ratio of 1:3. If the cost of debt remains the same, what is the new cost of equity for Dell? (Answer in %. Ex for .6789 put 67.89%)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started