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Macron Ltd. has an outstanding loan of $90 million with a bank, and the interest rate on the loan is 5%. The company has also 100 million ordinary...
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Macron Ltd. has an outstanding loan of $90 million with a bank, and

the interest rate on the loan is 5%. The company has also 100 million ordinary shares outstanding with a current price of $2.1 per share. The Beta of the ordinary share is 1.5, the market risk premium is 7.25% and the risk free rate is 2.5%. Macron Ltd. has a 30% corporate tax rate.
a) Compute Macron Ltd's weighted average cost of capital (WACC).
b) What would the WACC be if the company bought back half of its ordinary shares ($105 million) by issuing additional debt of this amount ($105million).

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Subject: Business, Finance

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