Finance 6.67 ptsA company's capital structure consists of 40% debt and 60% equity. The yield on this company's bonds is currently 8.75%. The betaof this company is 0.75, the risk-free rate is 4.5% and the expected return on the market is 12.5%. The tax rate of this company is21%. What is the WACC for this company?O 11.66%O 15.08%O 10.18%O 9.07%13.94%

Step 1: Calculate the cost of debt:After-tax cost of debt: Debt interest rate (yield) needs to be…

Answered: 6.67 pts A company's capital structure…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 8P

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K SIROM Scientific Solutions has $4 million of outstanding equity and $12 million of bank debt. The bank debt costs 5% per year. The estimated equity beta is 1. If the market risk premium is 9% and the risk - free rate is 4%, compute the weighted average cost of capital if the firm's tax rate is 25%. OA. 6.71% OB. 5.8% C. 5.49% D. 6.1%
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6 Houston Tools has expected earnings before interest and taxes of $189,400, an unlevered cost of capital of 12.87 percent, and a tax rate of 34 percent. The company has $318,000 of debt that carries a coupon rate of 6.2 percent. The debt is selling at par value. What is the value of this firm? A $978,758.89 B $1,113,758.89 C $996,758.89 D. $1,079,402.05

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