RDA Mines Inc. operates an unobtanium mine on the planet Alberta which is a sate
ID: 2802874 • Letter: R
Question
RDA Mines Inc. operates an unobtanium mine on the planet Alberta which is a satellite in the Alpha Centauri system near Pandora. The people of Alberta have instituted a corporate tax at the rate of 38%. RDA's weighted average cost of capital is 12%. RDA has 25% debt in its capital structure (debt-to-equity is 0.33) and the before-tax cost of debt is 7%.
What is the cost of equity for RDA given its WACC is ????% ( Round two decimal places)
Homework: HW of CH12 core: 0 of 1 pt Problem 12.LO3.20 (similar to) Hw Score: 72.22%,6.5 of 9 ptsExplanation / Answer
WACC = Wd×Rd+We×Ke
W is weights of respective portfolios
R is return on respective portfolios
Wd+We = 1
Cost of equity, Ke = (WACC-Wd×Rd)÷We
= (12%-0.25×7%×(1-38%)/0.75
= (12%-1.085%)/0.75
= 14.55%
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