contestada

A venture has raised $4,000 of debt and $6,000 of equity to finance its firm. Its cost of borrowing is 6%, its tax rate is 40%, and its cost of equity capital is 8%. What is the venture’s weighted average cost of capital?

Respuesta :

eooyibo123

Answer:

WACC= 6.24%≈ 6.2%

Explanation:

Weighted average cost of capital(WACC)= {(S/T)*r1}+ {(D/T)*r2)*(1-R)}

Let us define the terms

Stockholder Equity (S)= $6,000

Total value of business= S+D= 4,000+6,000= 10,000

Cost of equity(r1)= 8%

Debt(D)= $4,000

Cost of debt)r2)= 6%

Tax rate(R)= 40%

Therefore

WACC= {(6,000/10,000)*0.08}+ {(4,000/10,000)*0.06* (1-0.40)}

WACC= 0.048 + (0.024*0.6)= 0.048+0.0144

WACC= 0.0624

WACC= 6.24%

Otras preguntas