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(c) According to Modigliani & Miller Theory (M&M), WACC of the firm is not affected by the capital structure. Changes of capital structure weights is
(c) According to Modigliani & Miller Theory (M&M), WACC of the firm is not affected by the capital structure. Changes of capital structure weights is offset by the change in the cost of equity, given the following information: Required return on assets = 16%; cost of debt = 10%; percent of debt = 45% Calculate: 0 Cost of equity. (3 marks) (6) The debt-to-equity ratio. Suppose the cost of equity is 25%. (4 marks) (iii) Percent of equity in the firm. (2 marks)
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