6. a firm has 5% cost of debt and 10% cost of equity. Market value for bonds is $20m, and $80m for equity. Assuming a 40% tax rate, what is the WACC? 8.72% 9.2% 8.6% O 9.0%
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
The term WACC or weighted average cost of capital refers to the total cost the company incurs in raising the capital from different external sources, like equity, debt, and preferred stock.
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