Your firm's k s is 10%, the cost of debt is 6% before taxes, and the tax
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Question:
| Your firm's ks is 10%, the cost of debt is 6% before taxes, and the tax rate is 40%. Given the following balance sheet, calculate the firm's after tax WACC: | |||||||
| Total assets | = | $ 25.000,00 | |||||
| Total debt | = | $ 15.000,00 | |||||
| Total equity | = | $ 10.000,00 |
| Your firm is in the 30% tax bracket with a before-tax required rate of return on its equity of 13% and on its debt of 10%. If the firm uses 60% equity and 40% debt financing, calculate its after-tax WACC. |
| Would a firm use WACC or MCC to identify which new capital budgeting projects should be selected? Why? |
| A firm's before tax cost of debt on any new issue is 9%; the cost to issue new preferred stock is 8%. This appears to conflict with the risk/return relationship. How can this pricing exist? |
| What determines whether to use the dividend growth model approach or the CAPM approach to calculate the cost of equity? |
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