Weighted Average Cost of Capital (WACC) for company X
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Calculate the WACC company X using the following information:
- Debt: $75,000 book value outstanding. The debt is trading at 90% of book value. The yield to maturity is 90%.
- Equity: 2,500,000 shares seling at $42 per share. Assume teh expected rate of return on X's stocks is 18%.
-Taxes: Company X's marginal tax rate is Tc =0.35
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Solution Summary
The expert calculates the WACC company X using the weighted average cost of capital.
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Market value of Debt = 90%*Book value of debt = 90%*75000=$67,500
Market value of equity = Shares outstanding * Market price of share = $2,500,000*42= $105,000,000.00
Total ...
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