Question: PROBLEM 4-6 Given Solutio Levered equity 1.25 = Value given Treasure bond 4.28% = Formula/Ca Market risk pr 3.50% 7.00% Tax rate 25.00% Debt as

PROBLEM 4-6 Given Solutio Levered equity 1.25 = Value given Treasure bond 4.28% = Formula/Ca Market risk pr 3.50% 7.00% Tax rate 25.00% Debt as % of C 25.00% Solution a. Low ERP High ERP Cost of equity b WACC with Low ERP Cap St After-Tax Weights Costs Product Debt 25.00% Equity 75.00% WACC with High MRP Cap Str After-Tax Weights Cost Product Debt 25.00% Equity 75.00%

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