Question

Please help fill in the highlighted values below:

Weighted Average Cost of Capital | D/E Wd 0.3 Rd 0% 4.77% 5.25% 6.75% 0.231 0.333 Rd(1-1) b 0.00% 3.15% 0.03465 4.46% 1.24 1.48 .64 WceRe WACC 1.000 7.50% 7.500% 0.769 8.54% 0.667 7.310% 0.571 10.10% 7.680% $ 833,333,333.00 $ 250,000,000.00 1 0.75 Rd=before tax cost of debt Rd(1-1)= After tax cost of debt b=beta Re=cost of common equity Wd=Weight of debt Wce=Weight of common equity

Answer 1

The highlighted columns can be filled as shown in below table.

Rd(1-T) Wce A 1 D/E 20 3 0.3 4 =B4/F4 5 0.75 B Wd JO 0.231 0.333 =A5*F5 C Rd 10 0.0477 0.0525 0.0675 1.24 1.48 1.64 =E2*(1+(1-0.3396) *A5) 0.0315 =C4*(1-0.3396) 0.0446 H WACC 0.075 =B3*D3+F3*G3 0.0731 0.0768 Re 0.075 0.0854 =(H4-B4*D4/F4 0.101 0.769 0.667 0.571

The resultant values are mentioned in below table.

E b 1 2 3 4 5 A D/E 0 0.3 0.499 0.75 B Wd 0 0.231 0.333 0.428 C Rd 0% 4.77% 5.25% 6.75% D Rd(1-1) 0% 3.15% 3.47% 4.46% 1.24 1.48 1.64 1.85 F w ce 1 0.769 0.667 0.571 Re 7.50% 8.54% 9.23% 10.10% H WACC 7.50% 7.29% 7.31% 7.68%