Question
Suppose your company is currently using 30% debt in its capital structure. The target level of debt is 50%, and the YTM on debt is
Suppose your company is currently using 30% debt in its capital structure. The target level of debt is 50%, and the YTM on debt is currently 9%, but is expected to increase to 9.5% because bankruptcy risk and agency costs. The corporate tax rate is 35% and the return on equity based on the current capital structure is 15%.
What is the RWACC under the new capital structure?
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Fundamentals Of Contemporary Financial Management
Authors: R. Charles Moyer, James R. McGuigan, Ramesh P. Rao
2nd Edition
0324406363, 978-0324406368
