Question
Suppose that a firm is financed with %60 equity and %40 debt. The interest rate on debt is %10 and the expected return on common
Suppose that a firm is financed with %60 equity and %40 debt. The interest rate on debt is %10 and the expected return on common stocks is %15. The firms tax rate is %25. What is the firms WACC? (15 pts)
| Year | Cash flow | Cash flow | Cash flow | Cash flow |
| Project A | Project B | Project C | Project D | |
| 0 | -100 | 25 | 100 | -250 |
| 1 | 200 | 35 | 55 | 35 |
| 2 | 500 | -200 | 35 | 145 |
| 3 | 50 | 33 | 50 | 330 |
| 4 | 60 | 55 | -100 | 55 |
| 5 | 35 | 155 | -35 | -250 |
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Personal Finance
Authors: Richard Stanton
2nd Edition
1519662106, 978-1519662101
