Question
You are trying to determine the WACC for a company. It has the following characteristics. The company had pre-tax net income of $75mm last year
You are trying to determine the WACC for a company. It has the following characteristics.
The company had pre-tax net income of $75mm last year and paid taxes of $25mm.
The company has $1,500mm of total liabilities, $100mm of accounts payable, and $650mm of long-term debt.
The company has 220mm shares authorized, 45mm shares issued, and 5mm shares of treasury stock. The stock now trades at $32.50 per share.
the 10 year Treasury rate is 4%
The pre-tax cost of debt is 8%
The company's Beta is 1.5 and the market return for equities is 9%.
What is the WACC?
Step by Step Solution
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Step: 1
SOLUTION To calculate the Weighted Average Cost of Capital WACC we need to calculate the cost of equ...
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Financial Reporting Financial Statement Analysis And Valuation A Strategic Perspective
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
9th Edition
1337614689, 1337614688, 9781337668262, 978-1337614689
