Homework Answers
| Levered Beta:- | Cost of Equity:- | ||||||||||||||
|
Unkevered beta |
tax |
(1- tax rate) |
Debt/ equity ratio |
(1-tax rate)*(debt / equity) | levered beta |
Risk free rate(%) |
levered beta |
market risk premium(%) |
cost of equity(%) |
||||||
| 0.8 | 40% | 0.6 | 0.00 | 0.00 | 0.80 | 4.5 | 0.80 | 5.5 | 8.90 | ||||||
| 0.8 | 40% | 0.6 | 0.11 | 0.07 | 0.85 | 4.5 | 0.85 | 5.5 | 9.19 | ||||||
| 0.8 | 40% | 0.6 | 0.25 | 0.15 | 0.92 | 4.5 | 0.92 | 5.5 | 9.56 | ||||||
| 0.8 | 40% | 0.6 | 0.43 | 0.26 | 1.01 | 4.5 | 1.01 | 5.5 | 10.04 | ||||||
| 0.8 | 40% | 0.6 | 0.67 | 0.40 | 1.12 | 4.5 | 1.12 | 5.5 | 10.67 | ||||||
| 0.8 | 40% | 0.6 | 1.00 | 0.60 | 1.28 | 4.5 | 1.28 | 5.5 | 11.54 | ||||||
| 0.8 | 40% | 0.6 | 1.50 | 0.90 | 1.52 | 4.5 | 1.52 | 5.5 | 12.86 | ||||||
| 0.8 | 40% | 0.6 | 2.33 | 1.40 | 1.92 | 4.5 | 1.92 | 5.5 | 15.05 | ||||||
| After tax cost of debt:- | WACC:- | ||||||||||||||
|
before tax cost of debt(%) |
tax (%) |
after tax cost of debt (%) |
weight of equity (1) |
weight of debt (2) |
cost of equity(%) (3) |
cost of debt (%) (4) |
1*3 (5) |
2*4 (6) |
WACC (5+6) |
||||||
| 6 | 40 | 3.6 | 1 | 0 | 8.90 | 3.6 | 8.90 | 0.00 | 8.90 | ||||||
| 6.1 | 40 | 3.66 | 0.9 | 0.1 | 9.19 | 3.66 | 8.27 | 0.37 | 8.64 | ||||||
| 7 | 40 | 4.2 | 0.8 | 0.2 | 9.56 | 4.2 | 7.65 | 0.84 | 8.49 | ||||||
| 8 | 40 | 4.8 | 0.7 | 0.3 | 10.04 | 4.8 | 7.02 | 1.44 | 8.46 | ||||||
| 10 | 40 | 6 | 0.6 | 0.4 | 10.67 | 6 | 6.40 | 2.40 | 8.80 | ||||||
| 12.5 | 40 | 7.5 | 0.5 | 0.5 | 11.54 | 7.5 | 5.77 | 3.75 | 9.52 | ||||||
| 15.5 | 40 | 9.3 | 0.4 |
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