correct!, I just realized
Has to be A. B would be right if it was after-tax, so that only leaves 8.3 and 8.0. I don’t see how it could be 8.0
Question: correct Correct answer: 8.3% Rationale: WACC = Wdebt × (1 - Tc) × Kd + Wequity × Ke + Wpreferred × Kp = 60% x (1 - 40%) x 7.5% + 40% x 14% + 0 (there is no preferred stock) = 0.027 + 0.056 = 8.3% I got the tax rate = 1 - 10/ (20-60 * 0.075) = 35.48 % too. don’t know why it says it’s 40%. question from allen resource.
lxwqh Wrote: ------------------------------------------------------- > don’t know why it says it’s 40%. question from > allen resource. Your question of “why” also contains the answer.
According to my calculation I got 8.5%. A? WACC = 7.5%(1-.3548)*.60+14%*.40
a for me too
I did it exactly the way budfox427 did it, so my answer is also A.