Calculating the WACC In the previous problem, suppose the company's stock has a beta of 1.10. The risk-free rate is 2.9 percent and the market risk premium is 7 percent. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 23 percent. What is the company's WACC?
Calculating the WACC In the previous problem, suppose the company's stock has a beta of 1.10. The risk-free rate is 2.9 percent and the market risk premium is 7 percent. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 23 percent. What is the company's WACC?
Chapter12: The Cost Of Capital
Section: Chapter Questions
Problem 10QTD
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Question 9, please help. Thank you!
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VIEWCalculation of the annual yield and after tax yield of both bonds is as follow
VIEWCalculation of the Cost of Equity is as follow:
VIEWCalculation of the weight of each source of capital on market value is as follow:
VIEWCalculation of weighted average cost of capital (WACC) is as follow:
VIEWAnswer of Question 9 is as follow:
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