Homework Answers
CALCULATION OF WACC OF THE FIRM:
COST OF EQUITY = 8.14%
COST OF DEBT = 5.79%
TAX RATE = 27%
COST OF DEBT AFTER TAX = 5.79% X 27% = 1.56%
= 5.79% - 1.56% = 4.23%
| PARTICULAR | VALUE IN MILLION | WEIGHTS | COST % | WACC% |
| MARKET VALUE OF EQUITY | $1874 | 0.8064 | 8.14 | 6.56 |
| MARKET VALUE OF DEBT | $450 | 0.1936 | 4.23 | 0.82 |
| TOTAL | $2324 | 1.00 | 7.38 |
WEIGHTED AVERAGE COST OF CAPITAL (WACC) OF THE FIRM IS 7.38%
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