Cinco De Mayo has a target debt-equity ratio of 0.62. (Hint: if you're not sure what...

Question

Question

Cinco De Mayo has a target debt-equity ratio of 0.62. (Hint: if youre not sure what to do about debt-equity ratio, watch m

Answer 1

Answer #1

D/A = D/(E+D)

D/A = 0.62/(1+0.62)

=0.3827

Weight of equity = 1-D/A

Weight of equity = 1-0.3827

W(E)=0.6173

Weight of debt = D/A

Weight of debt = 0.3827

W(D)=0.3827

After tax cost of debt = cost of debt*(1-tax rate)

After tax cost of debt = 10*(1-0.31)

= 6.9

WACC=after tax cost of debt*W(D)+cost of equity*W(E)

WACC=6.9*0.3827+19*0.6173

WACC =14.37%

Answer 2

Similar Homework Help Questions

Cinco De Mayo has a target debt-equity ratio of 0.63. (Hint: if you're not sure what...

Cinco De Mayo has a target debt-equity ratio of 0.63. (Hint: if you're not sure what to do about "debt-equity ratio", watch my YouTube video on that topic!) The yield to maturity on its bonds is 11 percent. Its cost of equity is 19 percent. The corporate income tax rate is 35 percent. Calculate the WACC for this company.
Cinco De Mayo has a target debt-equity ratio of 0.56. (Hint: if you're not sure what...

Cinco De Mayo has a target debt-equity ratio of 0.56. (Hint: if you're not sure what to do about "debt-equity ratio", watch my YouTube video on that topic!) The yield to maturity on its bonds is 11 percent. Its cost of equity is 20 percent. The corporate income tax rate is 32 percent. Calculate the WACC for this company. Multiple Choice 11.97% 12.99% 15.51% 16.28% 14.73%
Cinco De Mayo has a target debt-equity ratio of 0.56. (Hint: If you're not sure what...

Cinco De Mayo has a target debt-equity ratio of 0.56. (Hint: If you're not sure what to do about "debt-equity ratio", watch my YouTube video on that topic!) The yield to maturity on its bonds is 11 percent. Its cost of equity is 19 percent. The corporate income tax rate is 32 percent. Calculate the WACC for this company. Multiple Choice Ο 14.12% Ο 12.55% Ο 15.61% Ο Ο

Cinco De Mayo has a target debt-equity ratio of 0.69. (Hint: if you're not sure what...

Cinco De Mayo has a target debt-equity ratio of 0.69. (Hint: if you're not sure what to do about "debt-equity ratio", watch my YouTube video on that topic!) The yield to maturity on its bonds is 11 percent. Its cost of equity is 17 percent. The corporate income tax rate is 34 percent. Calculate the WACC for this company. rev: 09_20_2012 Multiple Choice 11.24% 10.28% 12.37% 13.02% 13.67% This is the last question in the assignment. To submit, use Alt...
Cinco De Mayo has a target debt-equity ratio of 0.58. (Hint: The yield to maturity on...

Cinco De Mayo has a target debt-equity ratio of 0.58. (Hint: The yield to maturity on its bonds is 11 percent. Its cost of equity is 16 percent. The corporate income tax rate is 32 percent. Calculate the WACC for this company. Multiple Choice 0 1287% 12.87% 0 13.52% 3.52% 0 11.06% 0 10.61% 0 12.23%
Lannister Manufacturing has a target debt-equity ratio of 0.62. Its cost of equity is 20 percent,...

Lannister Manufacturing has a target debt-equity ratio of 0.62. Its cost of equity is 20 percent, and its cost of debt is 12 percent. If the tax rate is 32 percent, what is the company's WACC? Multiple Choice 12.66% O 14.7% 14.7% 12.69% O 16.24% 16.24%

Sixx AM Manufacturing has a target debt—equity ratio of 0.61. Its cost of equity is 20...

Sixx AM Manufacturing has a target debt—equity ratio of 0.61. Its cost of equity is 20 percent, and its cost of debt is 9 percent. If the tax rate is 32 percent, what is the company's WACC? Multiple Choice 14% 11.38% 11.53% 15.48% 14.74%
what is the WACC? 1. A firm has a target debt-to-equity ratio of 1. Its cost...

what is the WACC? 1. A firm has a target debt-to-equity ratio of 1. Its cost of equity equals 12 percent, the cost of debt is 8 percent, and the tax rate is 30 percent. What is the weighted average cost of capital (WACC)? a) 10.0 percent. b) 10.8 percent. c) 9.8 percent. d) 8.8 percent.
Miller Manufacturing has a target debt–equity ratio of .70. Its cost of equity is 14 percent,...

Miller Manufacturing has a target debt–equity ratio of .70. Its cost of equity is 14 percent, and its cost of debt is 7 percent. If the tax rate is 38 percent, what is the company’s WACC?

Sixx AM Manufacturing has a target debt—equity ratio of 0.66. Its cost of equity is 18...

Sixx AM Manufacturing has a target debt—equity ratio of 0.66. Its cost of equity is 18 percent, and its cost of debt is 10 percent. If the tax rate is 33 percent, what is the company's WACC?