Again referring to Willerton of the two previous problems, assume the firms cost of retained earnings is

Question:

Again referring to Willerton of the two previous problems, assume the firm’s cost of retained earnings is 11% and its marginal tax rate is 40%. Calculate its WACC using its book-value–based ignoring flotation costs. Make the same calculation using the market-value–based How significant is the difference?

Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a...