Acme WACC Example 2

Acme WACC Example 2 - $4.3 million from stock sales with an...

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Acme WACC Example 2 Acme Corporation is going to finance their widget assembly line using the following sources of capital: $7.1 million from bond sales with an average cost of 9.3% per year. $9.4 million from a bank loan with an interest rate of 6.4% per year.
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Unformatted text preview: $4.3 million from stock sales with an average cost of 12.5% per year. $5.7 million in retained earnings that could have be used to earn an 11.5% return elsewhere. If Acme’s effective tax rate is 36%, what is their after-tax weighted average cost of capital?...
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