Computation of weighted average cost of capital
1. The market value of your firm's equity is $500 million, which is also the value of your total debt. Your cost of debt (rd) is 6% and your cost of equity is (re) is 10%. What is your weighted average cost of capital (WACC) if your tax rate is 40%?
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1. The market value of your firm's equity is $500 million, which is also the value of your total debt. Your cost of debt (rd) is 6% and your cost of equity is (re) is 10%. What is your weighted average cost of capital (WACC) if your tax rate is 40
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How much higher would the rate of return be on a 10-year A-rated corporate bond than on a 5-year Treasury bond? Here we assume that the pure expectations theory is NOT valid. Disregard cross-product terms, i.e., if averaging is required, use the a
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