![]() ![]() If the tax rate is 35 percent, what is the WACC? 15.3 Flotation Costs Suppose in the previous problem Watta is seeking $30 million for a new project. ![]() Its cost of debt is 9 percent, before taxes. ![]() What is Watta s cost of equity capital? 15.2 Calculating the WACC In addition to the information given in the previous problem, suppose Watta has a target debt-equity ratio of 50 percent. The stock currently sells for $45 per share. Watta s last dividend was $1.20 per share, and the dividend is expected to grow at 8 percent indefinitely. The market risk premium is 6 percent, and the risk-free rate is 6 percent. 1 CHAPTER 15 Cost of Capital 517 Chapter Review and Self-Test Problems 15.1 Calculating the Cost of Equity Suppose stock in Watta Corporation has a beta of.80. ![]()
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