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bradydodson47
14.02.2020 •
Business
Finally There! has 1,500 bonds outstanding with a $1,000 par value, a yield to maturity of 6.4 percent, and a market price of $989 each. The firm also has 74,000 shares of common stock outstanding at a price per share of $35 and a beta of 1.08. The risk-free rate is 2 percent, the market risk premium is 7 percent, and the tax rate is 34 percent. What is the company's WACC?
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Ответ:
7.62%
Explanation:
The WACC in the given question shall be calculated using the following mentioned formula:
WACC=[(Market value of Equity*cost of equity+Market value of Debt* post tax cost of debt)/(Market value of Equity+Market value of Debt)]
In the given question:
Market value of Equity= 74,000*$35=$2,590,000
Cost of equity=Risk free return+Beta equity*market risk premium
=2%+1.08*7%=9.56%
Market value of Debt=1,500*$989=$1,483,500
Post tax rate of debt=6.4%*66%(1-34%)=4.22%
WACC=[($2,590,000*9.56%+$1,483,500*4.22%)/($2,590,000+$1,483,500)]
=7.62%
Ответ:
A
Step-by-step explanation:
Self explanatory.