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WACC and expected return on equity

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A firm has a WACC of 12%, $500,000 in 9% debt, $800,000 in equity. Both debt and equity are shown at market values, and the firm pays no taxes. Recall with no taxes that the expected return on assets equals the WACC. Determine the expected return on equity.

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This solution helps explore financial concepts such as WACC and return on equity.

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Answer:
Given that,
WACC=12%
Market value of 9% ...

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  • MBA, Indian Institute of Finance
  • Bsc, Madras University
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