RuMolt Motors has 33 Million shares outstanding with a share price of $15 per share. In addition, RuMolt has issued bonds with a total Current Market value of $138 Million. Suppose RuMolt's equity cost of capital is 12 %, and its debt cost of capital is 7 %. a. What is Rumolt's pre-tax WACC? b. If Rumolt's corporate tax rate is 21 %, what is its after-tax WACC?
RuMolt Motors has 33 Million shares outstanding with a share price of $15 per share. In addition, RuMolt has issued bonds with a total Current Market value of $138 Million. Suppose RuMolt's equity cost of capital is 12 %, and its debt cost of capital is 7 %. a. What is Rumolt's pre-tax WACC? b. If Rumolt's corporate tax rate is 21 %, what is its after-tax WACC?
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
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Transcribed Image Text:RuMolt Motors has 33 Million shares
outstanding with a share price of $15 per share.
In addition, RuMolt has issued bonds with a total
Current Market value of $138 Million. Suppose
RuMolt's equity cost of capital is 12 %, and its
debt cost of capital is 7 %.
a. What is Rumolt's pre-tax WACC?
b. If Rumolt's corporate tax rate is 21 %, what is
its after-tax WACC?
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