Question: Adidas has $20 million capital, of which, 30% is equity. Shareholders' required rate of return is 12% p.a. Creditors charge a 8% p.a interest. Calculate

Adidas has $20 million capital, of which, 30% is equity. Shareholders' required rate of return is 12% p.a. Creditors charge a 8% p.a interest.

  1. Calculate Adidas' Weighted Average Cost of Capital. Answer:
  2. An additional $3 million of equity capital has been raised to invest in a new marketing campaign. Due to increased risk of higher industry competition, shareholders' required rate of return increases by 3% p.a. What is Adidas' new WACC? Answer:

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