medium · Principles of Finance cost-of-capital-structure
A company has a market value of equity of $400M and total debt of $200M. The equity beta is 1.20, the risk-free rate is 4%, and the equity risk premium is 5%.
If the pre-tax cost of debt is 6% and the marginal tax rate is 25%, what is the firm's WACC?
- 8.17%
- 8.67%
- 7.50%
- 9.00%
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