A long-term bond has been issued with a market value of $50 million and an expected return of 9%. The company has 4 million shares outstanding trading for $10 each. At this price the shares offer an expected return of 17%. What is the weighted-average cost of capital for the company's assets and operations if the company does not pay any taxes?
WACC is the weighted average cost of capital whereby the target proportions of debt and equity along with the component costs of capital are used to calculate. The equation can be summarized as ...
This solution is comprised of a detailed explanation to calculate the weighted average cost of capital.