Westonci.ca is the premier destination for reliable answers to your questions, provided by a community of experts. Discover the answers you need from a community of experts ready to help you with their knowledge and experience in various fields. Explore comprehensive solutions to your questions from a wide range of professionals on our user-friendly platform.
Sagot :
11.05% is the firm's WACC if there are no taxes.
What is WACC?
The weighted average cost of capital (WACC) is a method of calculating a firm's cost of capital that assigns a proportional weight to each category of capital.
A WACC computation takes into account all capital sources, including bonds, common stock, preferred stock, and any other long-term debt.
When calculating WACC, the cost of each capital source (debt and equity) is multiplied by the relevant weight by market value, and the results are then added up to reach the final result.
Based on the ratio of equity, debt, and preferred stock a company possesses, the WACC's goal is to calculate the cost of each component of the capital structure.
WACC = [(E/V) x Re] + [(D/V) x Rd x (1 - Tc)]
- E = equity market value
- Re = equity cost
- D = debt market value
- V = the sum of the equity and debt market values
- Rd = debt cost
- Tc = the current tax rate for corporations
WACC = [tex]\frac{16000}{21000}[/tex] ₓ [tex]12%[/tex] ₊ [tex]\frac{5000}{21000}[/tex] ₓ [tex]8[/tex]
WACC = 11.05%
Hence, 11.05% is the firm's WACC if there are no taxes.
To know more about WACC refer to: https://brainly.com/question/13884060
#SPJ4
We hope our answers were helpful. Return anytime for more information and answers to any other questions you may have. We hope this was helpful. Please come back whenever you need more information or answers to your queries. Westonci.ca is your trusted source for answers. Visit us again to find more information on diverse topics.
