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Question

A company has a market value of $500 million.

It has a market value of equity of $200 million, a market

value of long term debt of $150 million.

The cost of equity is 12%, the cost of long term debt is 8%, and the cost of short term debt is 6%. The marginal tax rate is 35%.

what is the weighted average pre tax cost of capital (WACC) for this company?


The answer is 8.37%, what is the mathematical equation used to get the 8.37% answer?

Top Answer

Pre Tax WACC = (MV of equity/total MV x cost of equity) + (MV... View the full answer

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