Assume JUP has debt with a book value of $15 million, trading at 120% of par...

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Answer 1

Answer #1

Market value of equity= 2*20 =$40 m

Market value of debt= 15*120% =$18 m

Total value of Firm=$ 58m

Cost of debt= 8%

After tax cost of debt = 8(1-0.30) =5.6%

WACC= (Weights of Equity * Cost of Equity) + (Weights of Debts * Cost of Debts)

WACC= (40 / 58 *12% + 18/58 * 5.6%)

WACC = 10.01%

Correct Answer Is D

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Answer 2

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