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Assume JUP has debt with a book value of $20 million, trading at 120% of par value. The bonds have a yield to maturity of 7%. The firm's book value of equity is $16 million, and it has 2 million shares trading at $19 per share. The firm's cost of equity is 12%. What is JUP's WACC if the firm's marginal tax rate is 35%

Answer :

tanseershar

Answer:

9.12%

Explanation:

WACC=E*Ke+D*Kd*(1-t)/(E+D)

E=2*19=$38 million

Ke=12%

D=$20*1.2=$24 million

Kd=7%

WACC=38*12%+24*7%(1-35%)/(38+24)

WACC=9.12%

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