Spot Company’s balance sheet consists of the following: $790 million and $230 million. Its current after-tax cost of debt is 4% and its cost of equity is 8%. You have been analyzing various market factors and have estimated that the market value of its debt is currently $760 million and the market value of the equity is $690 million. Furthermore, you believe that given current market conditions and the existence of flotation costs, the marginal after-tax cost of debt would be 70 basis points higher than the existing after-tax cost of debt and the marginal cost of equity would be 130 basis points higher. What is the difference in the company's Weighted Average Cost of Capital (WACC) based on the market-based data and the book-value data? Subtract the book value WACC from the market value WACC and present your answer in percentage terms, rounded to decimal places (e.g., 1.23%]. Round your answer to 2 decimal places. Please show all work including how to set up in excel. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Spot Company’s
Round your answer to 2 decimal places. Please show all work including how to set up in excel.
Note:-
- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
- Answer completely.
- You will get up vote for sure.
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