The Brassy Co. has expected EBIT = $910, an unlevered cost of capital of 12%, and debt with a face and market value of $2,000 paying an 8.5% annual coupon. If the tax rate is 34%, what is the WACC
Of Brassy Co.?
A) 10.56%
B) 11.12%
C) 13.25%
D) 13.64%
E) 14.45%

Question

Quizplus · Accepted Answer

The WACC is calculated using the formula: WACC = (E/V) * Re + (D/V) * Rd * (1-Tc). First, calculate the value of equity (E) using the formula: E = EBIT * (1-Tc) / Re. Then, calculate the total value (V = E + D). Substitute these values into the WACC formula to find the correct answer.