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Sagot :
Answer:
0.0038 %
Explanation:
WACC = Cost of Equity x Weight of Equity + Cost of Debt x Weight of Debt
where,
Cost of Equity Calculation
Cost of Equity = ($1.593 x 1.04) ÷ $36 + 0.04 = 11.33 %
Cost of Debt Calculation
PMT = 1000 x 7 % = $70
N = 4.89
PV = $ 1,000 x 99 % = $990
FV = 1,000
P/YR = 1
YTM = ?
Therefore Pre- tax cost of debt is 7.25 %
After tax cost of debt = 7.25 % x ( 1 - 0.34)
= 4.79 %
Weight of Equity = 210,000 x $36 / (210,000 x $36 + 6,000 x $1,000)
= 0.0010
Weight of Debt = 6,000 x $1,000 / (210,000 x $36 + 6,000 x $1,000)
= 0.00079
Now
WACC = 11.33 % x 0.0010 + 4.79 % x 0.00079
Therefore
Daniel's weighted average cost of capital is 0.0038 %
Common stock is corporate equity, a type of security as ownership in a corporation. The weighted average cost of capital (WACC) will be 0.0038 %.
What is WACC?
The weighted average cost of capital (WACC) is the amount a corporate is expected to pay its deposit holders for funding their assets. It is calculated as:
[tex]\rm WACC = \text{Cost of Equity} \times \text{Weight of Equity} + \text{Cost of Debt }\times \text{Weight of Debt}[/tex]
The cost of equity is calculated as:
[tex]\begin{aligned}\text{Cost of Equity} &= \dfrac{(\$1.593 \times 1.04)}{\$36 + 0.04}\\\\&= 11.33 \%\end{aligned}[/tex]
The cost of debt is calculated as:
Given,
Maturity year = 4.89 years
Face value = $1000
The pre-tax cost of the debt is 7.25% and after-tax the cost will be,
[tex]7.25 \% \times ( 1 - 0.34) = 4.79 \%[/tex]
The weight of equity is calculated as:
[tex]\dfrac{210,000 \times \$36}{ (210,000 \times \$36 + 6,000 \times \$1,000)} = 0.0010[/tex]
The weight of debt is calculated as:
[tex]\dfrac{6000\times \$1000}{ (210,000 \times \$36 + 6,000 \times \$1,000)} = 0.00079[/tex]
WACC is calculated as:
[tex](11.33 \% \times 0.0010)+ (4.79 \% \times 0.00079)= 0.0038 \%[/tex]
Therefore, Daniel's WACC is 0.0038 %.
Learn more about WACC here:
https://brainly.com/question/17161057
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