Respuesta :
Answer : The company's weighted average cost of capital (WACC) is 12.24%
We have:
No. of outstanding shares = 8,000,000
Market price per share = $28
[tex] Market Value of equity (E) = Market price per share * No. of outstanding shares [/tex]
[tex] Market Value of equity (E) = 8,000,000 * 28 [/tex]
[tex] Market Value of equity (E) = $224,000,000 [/tex]
Face Value of Debt = $24,000,000
[tex] Market Value of debt (D) = $24,000,000 * 1.02 [/tex]
[tex] Market Value of debt (D) = 24480000 [/tex]
[tex] Total Value of Capital (V) = Mkt Value of Equity (E) + Mkt Value of Debt (D) [/tex]
[tex] Total Value of Capital (V) = 224000000 + 24480000 [/tex]
Total capital (V) = $248,480,000
[tex] Cost of Equity (R_{e}) = 13%[/tex]
[tex] Cost of debt (R_{d}) = 8% [/tex]
[tex] Tax Rate = 34% [/tex]
WACC = (\frac{E}{V}* R_{e}) + (\frac{D}{V}* R_{d}*(1 - T))
[tex] WACC = (\frac{224000000.00}{248480000.00}* 0.13) + (\frac{24480000.00}{248480000.00}* 0.08*(1 - 0.34)) [/tex]
[tex] WACC = (0.9* 0.13) + (0.1* 0.08*(1 - 0.34)) [/tex]
[tex] WACC = 0.1172 + 0.0052 [/tex]
[tex] WACC = 0.1224 [/tex]
