Homework Answers
After tax WACC = [0.28 × 0.10(1 - 0.40)] + (0.20 × 0.11) + (0.52 × 0.15)
After tax WACC = 0.1168 or 11.68%
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I solved it wrong by doing 30%*12*(1-40%)+13%*12%*+65%*15%=
0.021600 + 0.015600 + 0.097500=
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I am not...
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QUESTION 4: A firm has a capital structure containing 40 percent debt, 10 percent preferred stock,...
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values, that consists of 30 percent debt, 5 percent preferred
stock, and 65 percent common stock. If the returns required by
investors are 12 percent, 13 percent, and 15 percent for the debt,
preferred stock, and common stock, respectively, what is Pharoah’s
after-tax WACC? Assume that the firm’s marginal tax rate is 40
percent.
I solved it wrong by doing 30%*12*(1-40%)+13%*12%*+65%*15%=
0.021600 + 0.015600 + 0.097500=
0.1347=13.47%
I am not...
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