Wacc ???
This query is : Resolved
10 January 2012
Capital structure of AB Ltd is
Debt 60%
Equity 40%
Interest rate on debt is 6.5% and risk free return (Rf ) 5% and risk premium is 6% and bita of firm is 1.2 and tax rate is 40 %
Then Weighted Average cost of capital is(WACC) ?
Debt 60%
Equity 40%
Interest rate on debt is 6.5% and risk free return (Rf ) 5% and risk premium is 6% and bita of firm is 1.2 and tax rate is 40 %
Then Weighted Average cost of capital is(WACC) ?
10 January 2012
1.Ke=5+1.2*6= 12.2%(CAPM model)
2.Kd=6.5%(1-0.40)=3.9%
3.WACC=Wd*Kd+We*Ke
WACC=0.60*3.90+0.40*12.2= 7.22%
WACC= 7.22% answer
2.Kd=6.5%(1-0.40)=3.9%
3.WACC=Wd*Kd+We*Ke
WACC=0.60*3.90+0.40*12.2= 7.22%
WACC= 7.22% answer
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