Rumolt Motors has 33 million shares outstanding with a share price of $28 per share. In...
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Rumolt Motors has 33 million shares outstanding with a share price of $28 per share. In addition, Rumolt has issued bonds with a total current market value of $308 million. Suppose Rumolt's equity cost of capital is 11%, and its debt cost of capital is 8%. a. What is Rumolt's pre-tax WACC? b. If Rumolt's corporate tax rate is 22%, what is its after-tax WACC? Rumolt Motors has 33 million shares outstanding with a share price of $28 per share. In addition, Rumolt has issued bonds with a total current market value of $308 million. Suppose Rumolt's equity cost of capital is 11%, and its debt cost of capital is 8%. a. What is Rumolt's pre-tax WACC? b. If Rumolt's corporate tax rate is 22%, what is its after-tax WACC?
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a To calculate Rumolts pretax WACC we need to weight the cost of equity and the cost of debt by thei... View the full answer
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