Company A is financed by 18% of debt and the rest of the company is financed by common equity. The company’s before-tax
Posted: Thu May 19, 2022 12:00 am
Company A is financed by 18% of debt and the rest of the company
is financed by common equity. The company’s before-tax cost of debt
is 4.5%. Currently the risk-free rate is 1.8%, the market risk
premium is 6%, and the stock has a beta of 1.6. If company A faces
a marginal tax rate of 30%, its weighted average cost of capital
(WACC) should be _____. (Note: Round your answer as
decimals with three decimal places. For example, if your answer is
8.7%, you should write 0.087 in the answer box. DO NOT write your
answer as percentages as you will be marked wrong.)
is financed by common equity. The company’s before-tax cost of debt
is 4.5%. Currently the risk-free rate is 1.8%, the market risk
premium is 6%, and the stock has a beta of 1.6. If company A faces
a marginal tax rate of 30%, its weighted average cost of capital
(WACC) should be _____. (Note: Round your answer as
decimals with three decimal places. For example, if your answer is
8.7%, you should write 0.087 in the answer box. DO NOT write your
answer as percentages as you will be marked wrong.)