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:

WACC=(E/V)×Ke+(D/V)×Kd×(1Tc)WACC = (E/V) \times Ke + (D/V) \times Kd \times (1 - Tc)

Where:

  • EE is the market value of equity
  • VV is the total value of the company (equity + debt)
  • KeKe is the cost of equity
  • DD is the market value of debt
  • KdKd is the cost of debt
  • TcTc is the tax rate

Could you provide more details to calculate the WACC?

Ask a new question for Free

By Image

Drop file here or Click Here to upload

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