EBK CORPORATE FINANCE
4th Edition
ISBN: 8220103145947
Author: DeMarzo
Publisher: PEARSON
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Chapter 15, Problem 11P
Rumolt Motors has 30 million shares outstanding with a price of $15 per share. In addition, Rumolt has issued bonds with a total current market value of $150 million. Suppose Rumolt’s equity cost of capital is 10%, and its debt cost of capital is 5%.
- a. What is Rumolt’s pretax weighted average cost of capital?
- b. If Rumolt’s corporate tax rate is 35%, what is its after-tax weighted average cost of capital?
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Chapter 15 Solutions
EBK CORPORATE FINANCE
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