A firm has a beta of 1.3 and a debt-to-equity ratio of .4. The market rate of return is 11.6
1 answer:
Beta= 1.3
Debt to equity ratio= 0.4
Market rate of return= 11.6%
= 11.6/100
= 0.116
Tax rate= 32%
= 32/100
= 0.32
Risk free rate= 3.3%
= 3.3/100
= 0.033
Pretax cost of debt= 7.2%
= 7.2/100
= 0.072
The firm's WACC can be calacluated as follows
RS= 0.033+1.3(0.116-0.033)
= 0.033+1.3(0.083)
= 0.033+0.1079
= 0.1409
WACC= (1/1.4)(0.1409)+(2/1.4) (0.072)(1-0.32)
= (0.7142)(0.1409) + (1.4285)(0.072)(0.68)
= 0.1006+0.0699
= 0.1705(100)
= 17.05%
Hence the firm's WACC is 17.05%
You might be interested in
That'd be 32 with no remainder.
Answer:
D=M/V
D=65.1/6.2
Density is 10.5 grams per centimetre cube
Step-by-step explanation:
Ya I like the first one better than the second one but both are good
The first answer, answer A. It's easy.
