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%.
(c) After-tax cost of debt is 5.6% pa.
(d) After-tax WACC is 16.4% pa.
Related Book For
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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