Ripple Wine Merchants has 10,700 shares of stock outstanding at a price per share of $63. The risk-free rate is 2.8% and the expected market return is 9.8% Ripple has a beta of 1.59. The company also has 320 bonds outstanding, with a par value of $1000 per bond. The after-tax cost of debt is 5.89% and the bonds sell for 93.6% of par. What is the firm's WACC if the tax rate is 21%? O O Multiple Choice 9.44% 9.52% 9.78% 9.04% 9.14%
Ripple Wine Merchants has 10,700 shares of stock outstanding at a price per share of $63. The risk-free rate is 2.8% and the expected market return is 9.8% Ripple has a beta of 1.59. The company also has 320 bonds outstanding, with a par value of $1000 per bond. The after-tax cost of debt is 5.89% and the bonds sell for 93.6% of par. What is the firm's WACC if the tax rate is 21%? O O Multiple Choice 9.44% 9.52% 9.78% 9.04% 9.14%
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
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step 1: Introduction to WACC :
VIEWStep 2: Calculate Market Value of Equity (E) :
VIEWStep 3: Calculate Market Value of Debt (D):
VIEWStep 4: Calculate Total Market Value (V) :
VIEWStep 5: Calculate Weights (w_e) and (w_d) :
VIEWStep 6: Calculate Cost of Equity ((Re)) using CAPM :
VIEWStep 7: Calculate WACC using the formula:
VIEWStep 8: Calculate the Final Result :
VIEWSolution
VIEWStep by step
Solved in 9 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education