Explore BrainMass
Share

WACC

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Please help me with the attached file.

© BrainMass Inc. brainmass.com October 24, 2018, 10:36 pm ad1c9bdddf
https://brainmass.com/economics/finance/164513

Attachments

Solution Summary

Solution contains calculations of weighted average cost of capital.

$2.19
See Also This Related BrainMass Solution

Figuring the WACC, the unlevered beta & WACC with new capital structure

As the Vice President of a Finance company with the following available data:

Total assets $ 10,000,000.00
Debt $ 2,500,000.00
common equity $ 7,500,000.00
before tax cost of debt 12.00%
risk-free rate 5.00%
Market Return 16.00%
beta at current capital structure 1.20
Tax Rate 40%

What is my firms's current Weighted Average Cost of Capital (WACC)?

What is my firm's unlevered beta?

If I am considering changing my firm's capital structure to 40% debt and 60% common equity, to make this change, I will issue additional debt and use the proceeds to repurchase common stock. If I do this, the before tax cost of debt will rise to 14%. What would be my firm's WACC if you adopt this new capital structure?

View Full Posting Details