Math Problem Statement
ABC's weighted average cost of capital (WACC) is:
Group of answer choices
12.0%
12.32
10.00
13.11
12.23
Solution
To determine ABC's weighted average cost of capital (WACC), I would need more specific details about ABC's financial structure, such as:
- The cost of debt (Kd): The interest rate ABC pays on its debt.
- The cost of equity (Ke): The expected return on equity based on the risk of the company or market.
- The weights of debt and equity (Wdebt and Wequity): The proportion of debt and equity in the company's capital structure.
- The tax rate (Tc): The corporate tax rate, since debt interest is tax-deductible.
The general formula for WACC is:
Where:
- is the market value of equity
- is the total value of the company (equity + debt)
- is the cost of equity
- is the market value of debt
- is the cost of debt
- is the tax rate
Could you provide more details to calculate the WACC?
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Math Problem Analysis
Mathematical Concepts
Finance
Weighted Average Cost of Capital (WACC)
Capital Structure
Formulas
WACC = (E/V) × Ke + (D/V) × Kd × (1 - Tc)
Theorems
WACC formula
Suitable Grade Level
College-level finance or business students
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