Connect with a community of experts and enthusiasts on IDNLearn.com. Join our knowledgeable community and access a wealth of reliable answers to your most pressing questions.
Sagot :
Answer:
17.03 %
Explanation:
WACC = Cost of Equity x Weight of Equity + Cost of Debt x Weight of Debt + Cost of Preference Stock x Weight of Preference Stock
where,
Cost of Debt is calculated as :
Per $100 of bonds
FV = $100
PV = ($105)
PMT = $100 x 7.20% = $7.20
N = 15
P/yr = 1
r = ?
Using a financial calculator to enter values as above, cost of debt (r) is 6.66%
We always use after tax cost of debt
Therefore,
After tax cost of debt = interest x (1 - tax rate)
= 4.995%
therefore,
WACC = 12.50 % x 96.51% + 4.995% x 0.965 + 6.00 % x 2.52 %
= 17.03 %
We value your presence here. Keep sharing knowledge and helping others find the answers they need. This community is the perfect place to learn together. IDNLearn.com has the solutions you’re looking for. Thanks for visiting, and see you next time for more reliable information.