Consider an enterprise with a capital structure consisting of 70 ebt and 30quity. if you use the costs of debt and equity of the

Question

natima [27]

1 year ago

11

Consider an enterprise with a capital structure consisting of 70 ebt and 30quity. if you use the costs of debt and equity of the

company from question 6 and 7, what would be the company’s wacc?

Business

1 answer:

Vedmedyk [2.9K] · Answer 1 · 2024-05-29T02:56:13+03:00

Consider an enterprise with a capital structure consisting of 70 debit and 30quity. if you use the costs of debt and equity of the company from questions 6 and 7, 6.5% by the company’s WACC.

WACC = Weight of debt * Cost of debt + Weight of equity * Cost of Equity

WACC = 70% * 5% + 30% * 10%

WACC = 3.5% + 3%

WACC = 6.5%.

The weighted average cost of capital represents the average cost of attracting an investor, whether that investor is a bondholder or a shareholder. This calculation weights the cost of capital according to the debt and equity used by the WACC company. This presents a clear hurdle for internal projects or potential acquisitions.

Learn more about WACC at

brainly.com/question/25566972

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