On March 1,a woman sees a car with a “for sale” sign and telephone number to call. She investigates the car and its value. She t
2 answers:
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Answer and Explanation:
The computation of firm’s market value capital structure and the Weighted average cost of capital is shown with the help of spreadsheet. Kindly find it below
The formulas that we use in spreadsheet is shown below:-
WACC = Weightage of debt × cost of debt × ( 1- tax rate) + (Weightage of preferred stock) × (cost of preferred stock) + (Weightage of common stock) × (cost of common stock)
As per question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below
Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)
The market rate of return - risk free rate of return = market risk premium
