A firm's market values of equity and debt are $750,000 and $250,000, respectively. The before tax cost of debt = 6%; RF = 4%; beta (β) = 0.8; the market risk premium = 10%; and the tax rate = 20%. Calculate the WACC (weighted average cost of capital).
Answer to relevant QuestionsA firm has common shares outstanding with a discount rate of 12 percent. The current market price is $22.75, and dividend payments for this year are expected to be $0.60. What is the per share implied growth rate?Montreal Brokers, a small brokerage firm and PEI tronics, a software development company, are both separately considering developing and marketing a new software package. Neither party is aware that the other is considering ...What is the cost of equity (Ke) given RF = 2%, beta (β) = 1.5, expected market return (ERM) =12%?What is the ROE indifference point of the two strategies of Arctic Inc. as follows? TC = 30%, Strategy 1: debt-equity ratio = 0.7. Strategy 2: debt-equity ratio = 1.0. Arctic Inc.’s after-tax cost of debt is 10 percent.In the M&M tax world, what is the value of levered firm (VL) in Practice Problem 22 if the tax rate is 30 percent? What is the cost of levered equity? What is the market risk premium (MRP) given βU = 1.2 and RF = 2%?
Post your question