A firm is funded with $2 million of loans and $6 million of equity. The interest rate

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A firm is funded with $2 million of loans and $6 million of equity. The interest rate on the loans is 8% pa. The cost of equity is estimated to be 20% pa. The corporate tax rate is 30% pa. Which of the below statements is NOT correct?

(a) Weight of debt in the firm’s capital structure is 25%.

(b) Weight of equity in the firm’s capital structure is 66.67%.

(d) After-tax WACC is 16.4% pa.

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Financial Reporting Financial Statement Analysis and Valuation a strategic perspective

ISBN: 978-1337614689

9th edition

Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

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Posted Date: Dec 07, 2023 04:33 AM

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A firm is funded with $2 million of loans and $6 million of equity. The interest rate

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Financial Reporting Financial Statement Analysis and Valuation a strategic perspective

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