WACC CALCULATIONS Tax Rate: 40% Cost % Weight Debt 6.0% 20% Equity (CAPM) 0.00%

Question

WACC CALCULATIONS     Tax Rate: 40% Cost % Weight Debt 6.0% 20% Equity (CAPM) 0.00% 80% WACC 0.7% WACC=Weight(Debt)xCost(Debt)x(1-Tax Rate)+Weght(Equity)xCost(Equity) write out WACC calculation ASSUMPTIONS INPUTS Equity risk premium 5% Beta 1.60 What is Rate(Rf) write out calculation What is Rate(M) Re =Rf + (Rm-Rf) = Write out CAPM calculation WACC CALCULATIONS     Tax Rate: 40% Cost % Weight Debt 6.0% 20% Equity (CAPM) 0.00% 80% WACC 0.7% WACC=Weight(Debt)xCost(Debt)x(1-Tax Rate)+Weght(Equity)xCost(Equity) write out WACC calculation ASSUMPTIONS INPUTS Equity risk premium 5% Beta 1.60 What is Rate(Rf) write out calculation What is Rate(M) Re =Rf + (Rm-Rf) = Write out CAPM calculation

Explanation / Answer

WACC CALCULATIONS     Tax Rate: 40% Cost % Weight Debt 6.00% 20% 1.20% Equity (CAPM) 7.25% 80% 5.80% 5.80/80 WACC 7.00% WACC=Weight(Debt)xCost(Debt)x(1-Tax Rate)+Weght(Equity)xCost(Equity) write out WACC calculation ASSUMPTIONS INPUTS Equity risk premium 5% Beta 1.6 What is Rate(Rf) 0.75% write out calculation What is Rate(M) 5.75% Re =Rf + (Rm-Rf) = 7.25% Rf+ 1.6(5%) Write out CAPM calculation Rf=8%-7.25% 0.75% rm=rf+equity risk premium 5+0.75

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