Business, 26.12.2020 23:20 cancerbaby209

A firm is funded with $200 million in debt and $600 million in equity. The YTM on the firm's bonds is 10%. The tax rate is 30%. The firm has a beta of 1.25. The risk free rate is 2% and the market risk premium is 12%. The weighted average cost of capital for the firm is:

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Answer from: Jroc23

14.50%

Explanation:

Proportion of debt the firm uses = $200 / $200 + $600 = 0.25

Proportion of equity the firm uses = 1 - 0.25 = 0.75

WACC = proportion of debt x cost of debt x (1 - tax rate) + proportion of equity x cost of equity

cost of equity = risk free rate + (beta x market risk premium)

2% + (1.25 x 12%) = 17%

0.25 x 10% x (1 - 0.30) + 0.75 x 17%

1.75 + 12.75% = 14.50%

Answer from: Quest

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

hope it

Answer from: Quest

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A firm is funded with $200 million in debt and $600 million in equity. The YTM on the firm's bonds i...

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