Gina Electronics Inc. has long-term bonds with a face value of $2M, the coupon rate on the bonds is 5% and the yield on the bonds is also 5%. The unlevered cost of equity is 12.5%, and the value of Sun's equity is $3.6M. The corporate tax rate is 40%. What is Gina's WACC?

Gina Electronics Inc. has long-term bonds with a face value of $2M, the coupon rate on the bonds is 5% and the yield on the bonds is also 5%. The unlevered cost of equity is 12.5%, and the value of Sun's equity is $3.6M. The corporate tax rate is 40%. What is Gina's WACC?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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