The following is known about a company and a financial market: company: 3, 1.5, rd= .08,...

 

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The following is known about a company and a financial market: company: 3, 1.5, rd= .08, D/E = 1, tax rate = .3 financial market: rf = .07, rm = .13. . (a) Assuming that the MM assumptions obtain, i.e. that debt is predetermined and permanent, calculate resras Bas Ba, WACC. . (b) Assuming that debt is rebalanced, calculate re, ras Bas Bd, WACC. (c) Explain the differences between (a) and (b). The following is known about a company and a financial market: company: 3, 1.5, rd= .08, D/E = 1, tax rate = .3 financial market: rf = .07, rm = .13. . (a) Assuming that the MM assumptions obtain, i.e. that debt is predetermined and permanent, calculate resras Bas Ba, WACC. . (b) Assuming that debt is rebalanced, calculate re, ras Bas Bd, WACC. (c) Explain the differences between (a) and (b).

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