a)
Total Debt from the Balance Sheet = $20
Value = Debt + Preferred Stock + Common Stock + Additional Equity + Retain Earning
= 20 + (3/20)*15 + 10*4 + 7.6 + 7.0
= 76.85
Therefore Market Debt to Value = 20/76.85 = 26.02%
b)
D/V | 20/76.85 | 26% |
E/V | 54.6/76.85 | 71% |
P/V | 2.25/76.85 | 3% |
(1-T)rd | (1-21%)*7% | 5.5300% |
rpreffered | 3/015 | 20% |
requity | Rf + B(Rpremium) = 4% + .9x(8%) | 11.20% |
therefore WACC = 9.98% after multiplying all factors in the formula
Problem 13-7 WACC (LO1) nts Examine the following book-value balance sheet for University Products Inc. The...
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