A firm has a capital structure with $110 million in equity and $40 million of debt. The expected return on its equity is
Posted: Sat Jul 02, 2022 10:22 pm
- A Firm Has A Capital Structure With 110 Million In Equity And 40 Million Of Debt The Expected Return On Its Equity Is 1 (79.01 KiB) Viewed 14 times
Market value of equity
Market value of debt
Market value of firm
Weight of Equity
Weight of debt
Cost of equity
Cost of debt
WACC
A firm has a capital structure with $110 million in equity and $40 million of debt. The expected return on its equity is 8.90%, and the firm has 2.10% Yield-to- Maturity on its debt. If the marginal tax rate is 21%, what is the Weighted Average Cost of Capital (WACC) of this firm? Note: Keep 4 decimals for intermediate results and 2 decimals for your final answer! Market Value of Equity = 110 Market Value of Debt = 40 Market Value of Firm - 150 Weight of Equity = .73 Weight of Debt = 27 Cost of Equity= 8.9% Cost of Debt= 2.1% WACC- 6.94% N A A A A