Orange Airlines has the following target and costs associated with its capital structure. Based on these parameters what is Orange Airlines' WACC?
Target common equity weight: |
60 percent |
Target debt weight: |
70 percent |
Cost of equity: |
14 percent |
Cost of debt: |
6 percent |
Tax rate: |
32 percent |
WACC = ((weight of debt * cost of debt*(1-tax rate)) + (weight
of equity * cost of equity))/Total weight
((70%*6%*(1-32%))+(60%*14%))/(70%+60%)
0.08658461538 or
8.66%
So wacc is 8.66%
Orange Airlines has the following target and costs associated with its capital structure. Based on these...
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