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You are trying to calculate the WACC for two firms. Firm XiG is publicly traded and firm TanW is a private firm. You have collected
You are trying to calculate the WACC for two firms. Firm XiG is publicly traded and firm TanW is a private firm. You have collected all necessary information for your WACC calculation:
In terms of liabilities, XiG has account payables of $Million and a bank loan of $Million. XiG also has cash holding of $Million. XiG is current trading at $share with Million shares outstanding. XiGs returns move one to one with the stock market returns.
XiGs average tax rate is and marginal tax rate of XiG is rated as Aa by Moodys and similar Aa rating firms have cost of debt of Risk free rate is market risk premium is
TanW is in the same industry as XiG. After consulting with an industry expert, you are confident that TanW and XiG have roughly the same business risk. Currently, TanW has net debt to equity ratio of TanWs average tax rate is and marginal tax rate of Its cost of debt is
Now you proceed to calculate the WACC for both firms.
Q What is WACC for XiG?
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