medium · Private Equity
A private equity manager is calculating the Weighted Average Cost of Capital (WACC) for a target. The risk-free rate is 4%, the equity risk premium is 6%, and the levered beta is 1.5.
If the target's pre-tax cost of debt is 8%, the tax rate is 25%, and the capital structure is 40% debt / 60% equity, what is the WACC?
- 10.2%
- 9.4%
- 13.0%
- 11.0%
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