Corporate Finance

posted by .

Taxes and WACC. Rainbow in the Dark Manufacturing has a target debt-equity ratio of .65. Its cost of equity is 13%, and its cost of debt is 8%. If the tax rate is 35%, what is the company's WACC?

  • Corporate Finance -

    (1/1.65) x .13 + (.65/1.65) x .08 x .65

    = .099273
    = 9.93%

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Business Finance

    Jungle, Inc., has a target debt−equity ratio of 0.72. Its WACC is 11 percent, and the tax rate is 31 percent. (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16)) Required: (a) If Jungle's …
  2. finance

    You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt, 15% preferred, and 45% common equity. The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of retained earnings …
  3. Finance

    You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt, 15% preferred, and 45% common equity. The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of retained earnings …
  4. Finance

    Spam Corp. is financed entirely by common stock and has a beta of 1.0. The firm is expected to generate a level, perpetual stream of earnings and dividends. The stock has a price-earnings ratio of 8 and a cost of equity of 12.5%. The …
  5. Finance

    Jungle, Inc. has a target debt-equity ratio of 0.72. Its WACC is 11.5 percent and the tax rate is 34 percent. What is the cost of equity if the aftertax cost of debt is 5.5 percent?
  6. Finance

    A company has a weighted average cost of capital of 8.9%. The company's cost of equity is 12 and its pretax cost of debt is 7.9% The tax rate is 35%. What is the company's target debt-equity ratio?
  7. Corporate Finance

    Finding the Capital Structure Fama's Llamas has a weighted average cost of capital of 9.8 percent. The company's cost of equity is 15 percent, and its cost of debt is 7.5 percent. Tha tax rate is 35 percent. What is Fama's debt-equity …
  8. Finance

    You were hired as a consultant to ABC Company, whose target capital structure is 40% debt, 15% preferred, and 45% common equity. The before-tax cost of debt is 8.00%, the cost of preferred is 7.50%, and the cost of common is 12.75%. …
  9. Finance

    Jungle, Inc., has a target debt−equity ratio of 0.84. Its WACC is 11.5 percent, and the tax rate is 34 percent. Required: (a) If Jungle's cost of equity is 14.5 percent, its pretax cost of debt is percent. (b) If instead you …
  10. Finance

    The ACME Suction Cup company has $4,500 of debt and $10,500 of common stock equity. The total value of the company is $15,000. The company's cost of equity is 11.5 percent, the cost of debt is 5.9 percent and the relevant tax rate …

More Similar Questions