Purchase Solution

Calculate the weighted average cost of capital (WACC)

Not what you're looking for?

Ask Custom Question

#1 Determine the weighted average cost of capital for a firm given the follow info below:

Equity : $200,000 shares;stock price of $73
Beta of 1.54; risk free rate of 4%; risk premium of 6%

Debt info: Book value of $3 million; interest expense of $278,000; average maturity of 13 years; Pre-tax cost of debt of 6.5%; tax rate of 30%

#2 What is the weighted average cost of capital if stock falls to $65.70 (a 10% decline in price). Leave all other variables as the same before

#3 What is the weighted average cost of capital is stock prices fall for $65.70 and the beta of the firm rises to 1.60. Leave all other variables to same as before.

#4 Suppose the pre-tax costs of debt increases to 8% because of the fall in stock price and rise in systematic risk. Determine the weighted average cost of capital.

Purchase this Solution

Solution Summary

The solution calculates the weighted average cost of capital (WACC) under different scenarios.

Purchase this Solution


Free BrainMass Quizzes
Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Operations Management

This quiz tests a student's knowledge about Operations Management

Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.