ou own another business with Assets on the books valued at $400,000. These assets were financed with Debt and Equity, where the D/E ratio was 3.0. If the cost of debt capital was 7% and the cost of equity capital was 19%, then what was the WACC of the firm? This is what I came up with. Is it correct? [3.0 * 0.07 * (1-0)] + (3.0 * 0.19) [0.21] + 0.57 = 0.78 or 78%
ou own another business with Assets on the books valued at $400,000. These assets were financed with Debt and Equity, where the D/E ratio was 3.0. If the cost of debt capital was 7% and the cost of equity capital was 19%, then what was the WACC of the firm? This is what I came up with. Is it correct? [3.0 * 0.07 * (1-0)] + (3.0 * 0.19) [0.21] + 0.57 = 0.78 or 78%
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
Section: Chapter Questions
Problem 1PS
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- You own another business with Assets on the books valued at $400,000. These assets were financed with Debt and Equity, where the D/E ratio was 3.0. If the cost of debt capital was 7% and the
cost of equity capital was 19%, then what was the WACC of the firm?
This is what I came up with. Is it correct?
[3.0 * 0.07 * (1-0)] + (3.0 * 0.19)
[0.21] + 0.57 = 0.78 or 78%
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