With a tax rate of 35%, Big Oil had a WAAC of 10.5%. Suppose Big Oil is
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With a tax rate of 35%, Big Oil had a WAAC of 10.5%. Suppose Big Oil is excused from paying taxes. How would its WACC change? Now suppose Big Oil makes a large stock issue and uses the proceeds to pay off all its debt. How would the cost of equity change?
Common stock beta...............0.85
Risk-free interest rate...............6%
Debt Value.......................385.70
Common stock................1,200.00
Debt interest rates...................9%
Cost of equity.......................12%
Cost Of EquityThe cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...
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Given data Common stock beta 085 Riskfree interest rate 6 Debt Value ...View the full answer
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Related Book For 
Fundamentals of Corporate Finance
ISBN: 978-0078034640
7th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
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