2. What would be the WACC if the company in question 1 changed its debt-to-equity ratio to zero?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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2. What would be the WACC if the company in
question 1 changed its debt-to-equity ratio to
zero?
Transcribed Image Text:2. What would be the WACC if the company in question 1 changed its debt-to-equity ratio to zero?
1. A company has currently a debt-to-equity
ratio of 0.25. Shareholders require a return
of 12% and the cost of debt is 5%. The
corporate tax rate is 20%. What is the
WACC of this company?
Transcribed Image Text:1. A company has currently a debt-to-equity ratio of 0.25. Shareholders require a return of 12% and the cost of debt is 5%. The corporate tax rate is 20%. What is the WACC of this company?
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