Question
Asked Oct 13, 2019
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ABC requires an investment of $50,000 and borrows $20,000 at 6%. If the return on equity is 15%, what is the firm's pretax WACC?

 

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Expert Answer

Step 1

Total capital required, C = $ 50,000

Debt = D = 20,000

Hence, equity = E = C - D = 50,000 - 20,000 = 30,000

Proportion of debt = Wd = D  / C = 20,00...

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Capital Structure

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