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chubhunter [2.5K]
3 years ago
14

Sip corp uses no debt. the weighted average cost of capital is 8 percent. if the current market value of the equity is 18 millio

n and there are no taxes what is the wacc explained
Business
1 answer:
grigory [225]3 years ago
6 0

Since there is no debt, all the capital that the company raises is in the form of common equity.

Since there is only equity (meaning the firm is a fully equity firm), the weighted average cost of capital (WACC) is nothing but the cost of equity

In this case the WACC represents the cost of equity

Therefore, cost of equity = WACC = 8%

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