Question

Asked Oct 25, 2019

a firm has a debt-to-equity ratio of 1.0. if we assume that the firm's debt pays 11% interest annualy, the equity has a 19% annual return, and the tax rate is 40%, then what is the firms WACC?

Step 1

Hence, cost of debt after tax is 6.6%.

The cost of debt is determined by multiplying cost of debt before tax with tax ...

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