Question

Adjusted WACC Clark Explorers, Inc., an engineering firm, has the following capital structure: the adjusted WACC for Clark Explorers at the following tax rates: Using market value and book value (separately, of course), find a 40% b. 30% c. 15% d. 5% a. What is the market value adjusted WACC for Clark Explorers at a tax rate of 40%? % (Round to two decimal places.)

Answer 1

B Ham Market price Outstanding units Book value Cost of capital Market value Weight Weighted Cost Equity Preferred Stock $80.69 $110.06 127,000 11,000 $3,202,000 $1,132,000 18.79% 12.98% 10,247,630.00 $1,210,660.00 61.74% 7.29% 11.60% 0.95% Debt $909.69 5,650 $5,650,000 10.80% 5,139,748.50 30.97% 3.34% $ $ 9 Tax rate WACC 40% 14.55% 11 a) 12 13 14 b) 15 Tax rate WACC 30% 14.89% 16 Tax rate WACC 15% 15.39% 17 c) 18 19 20 d) 21 Tax rate WACC 5% 15.72%

B E Debt hem с Equity 80.69 127000 3202000 0.1879 =C2*C3 =C6/SUM($C$6:$E$6) C7*C5 Market price Outstanding units Book value Cost of capital Market value Weight Weighted Cost 909.69 5650 5650000 Preferred Stock 110.06 11000 1132000 0.1298 =D2*D3 =D6/SUM($C$6:$E$6) =D7*D5 0.108 =E2*E3 =E6/SUM($C$6:$E$6) =E7*E5 10 11 a) Tax rate WACC 12 0.4 =($C$8+$D$8)+($E$8*(1-C11)) Tax rate WACC 0.3 =($C$8+$D$8)+($E$8*(1-C14)) 13 14 b) 15 16 17 C) 18 19 20 d) Tax rate WACC 0.15 =($C$8+$D$8)+($E$8*(1-C17)) Tax rate WACC 0.05 =($C$8+$D$8)+($E$8*(1-C20)) 21 27