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eemorales5100
14.12.2019 •
Business
Upton umbrellas has a cost of equity of 11.6 percent, the ytm on the company's bonds is 6.2 percent, and the tax rate is 40 percent. the company's bonds sell for 103.2 percent of par. the debt has a book value of $408,000 and total assets have a book value of $952,000. if the market-to-book ratio is 2.74 times, what is the company's wacc?
a. 9.59%
b. 5.46%
c. 8.16%
d. 9.86%
e. 8.27%
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Ответ:
WACC = 9.86%
so correct option is d. 9.86%
Explanation:
given data
cost of equity = 11.6 percent
bonds = 6.2 percent
bonds sell = 103.2 percent
debt book value = $408,000
total assets book value= $952,000
market to book ratio = 2.74 times
to find out
what is the company's WACC
solution
we get here first Total book value of equity that is express as
Total book value of equity = Total assets book value - Total debt book value .................1
Total book value of equity = 952000 - 408000
Total book value of equity = $544000
and here market to book ratio is
market to book ratio =![\frac{market\ value}{book\ value}](/tpl/images/0418/2131/73bee.png)
so market value of equity = (2.74 × 544000) = $1490560
and
After tax cost of debt = 6.2 (1 - tax rate)
After tax cost of debt = 6.2 (1 - 0.4)
After tax cost of debt = 3.72%
and
Market value of Debt = 408000 × 103.2%
Market value of Debt = $421056
so
Total market value = $1490560 + $421056
Total market value is =$1911616
and
WACC will be
WACC = Respective costs × Respective weights
WACC =![\frac{1490560}{1911616}11.6 + 3.72\frac{421056}{1911616}](/tpl/images/0418/2131/0210c.png)
WACC = 9.86%
so correct option is d. 9.86%
Ответ:
some people will get killed in the same field war.
Explanation: