Double-Major Co. has a cost of equity of 11.7 percent and an aftertax cost of debt...

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Double-Major Co. has a cost of equity of 11.7 percent and an aftertax cost of debt of 4.47 percent. The companys balance she

Answer 1

Answer #1

Market to book ratio = Market value / book value

2.83 = Market value / 605,000

Market value = 1,712,150

Market value of debt = 104.3% of 345,000 = 359,835

Total market value = 1,712,150 + 359,835 = 2,071,985

WACC = Weights * costs

WACC = (359,835 / 2,071,985)*0.0447 + (1,712,150 / 2,071,985)*0.117

WACC = 0.007763 + 0.096681

WACC = 0.1044 or 10.44%

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Answer 2

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