Please calculate the return on equity using Excel. Market Value of Debt Market vlaue of Equity...

Question

Question

Market Value of Debt Market vlaue of Equity Total Value of Capital $2,500,000.00 $1,000,000.00 $3,500,000.00 Тc 25.00% 10% WA

Please calculate the return on equity using Excel.

Answer 1

Answer #1

WACC = Debt% x Kd x (1-tax) + Equity% x Ke

10% = 71.43% x 5% x (1-25%) + 28.57% x Ke

Ke = 25.625%

Therefore expected return on equity = 25.625%

Answer 2

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