Weighted Average Cost of Capital (WACC) 1 In its 2017 10-k Black Diamond Equipme

Question

Weighted Average Cost of Capital (WACC) 1 In its 2017 10-k Black Diamond Equipment reported the following information about its capital structure. The firm had long term public debt outstanding of 1.5 billion dollars and short term debt of 331.5 million dollars. It's average cost of debt was 6.35%. The firm had 90 million public shares outstanding and each share was currently trading for $50.22. It's cost of equity was 16.5%. The firms current marginal tax rate was 21%. What is it's weighted average cost of capital (WACC)? WACC Equity value Debt Value Shares outstanding, millions Long Term Debt, millions Times: Share price, $ Short Term Debt, millions Equity value, $ million Debt Value, $ million Weighted average cost of capital Proportion After-tax Contribution Market value, of total Cost of Marginal cost of to weighted Source of capital $ million capital, % capital, % tax rate, % capital, % average, % Debt 21.0% Equity Enterprise value Wacc= Weighted Average Cost of Capital (WACC) 1 In its 2017 10-k Black Diamond Equipment reported the following information about its capital structure. The firm had long term public debt outstanding of 1.5 billion dollars and short term debt of 331.5 million dollars. It's average cost of debt was 6.35%. The firm had 90 million public shares outstanding and each share was currently trading for $50.22. It's cost of equity was 16.5%. The firms current marginal tax rate was 21%. What is it's weighted average cost of capital (WACC)? WACC Equity value Debt Value Shares outstanding, millions Long Term Debt, millions Times: Share price, $ Short Term Debt, millions Equity value, $ million Debt Value, $ million Weighted average cost of capital Proportion After-tax Contribution Market value, of total Cost of Marginal cost of to weighted Source of capital $ million capital, % capital, % tax rate, % capital, % average, % Debt 21.0% Equity Enterprise value Wacc=

Explanation / Answer

Equity value Debt Value Shares outstanding, millions 90 Long Term Debt, millions 1500 Times: Share price, $ 50.22 Short Term Debt, millions 331.5 Equity value, $ million 4519.8 Debt Value, $ million 1831.5 Weighted average cost of capital Proportion After-tax Contribution Market value, of total Cost of Marginal cost of to weighted Source of capital $ million capital, % capital, % tax rate, % capital, % average, % Debt 1831.5 28.84% 6.35% 21.00% 5.02% 1.45% Equity 4519.8 71.16% 16.50% 16.50% 11.74% Enterprise value 6351.3 Wacc= 13.19%

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