Explore BrainMass

Explore BrainMass

    Cost of equity/WACC

    Not what you're looking for? Search our solutions OR ask your own Custom question.

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

    A firm has a debt-to-equity ration of 1. Its (levered) cost of equity is 16% and its cost of debt is 8%. If there were no taxes, What would be its cost of equity if the debt-to-equity ratio were zero?

    A company has a debt to total value ratio of 0.5 . The cost of debt is 8% and that of unlevered equity is 12%. Calculate the weighted average cost of capital if the tax rate is 30%.

    © BrainMass Inc. brainmass.com March 4, 2021, 10:17 pm ad1c9bdddf
    https://brainmass.com/economics/personal-finance-savings/calculations-cost-equity-wacc-319005

    Solution Preview

    If debt to equity is zero, the firm is fully equity and so we have to find the unlevered cost of equity. This is calculated as
    rs = r0 + B/S (r0-rb) where
    rs = levered cost of equity = 16%
    r0 = unlevered ...

    Solution Summary

    The solution explains the calculation of cost of equity and WACC.

    $2.49

    ADVERTISEMENT