Calculate a firm's WACC given that the total value of the firm is $2 million,$600,000 of which is debt,the pre-tax cost of debt is 10%,and the cost of equity is 15%.The firm pays no taxes.

Name: Calculate a firm's WACC given that the total value of the firm is $2 million,$600,000 of which is debt,the pre-tax cost of debt is 10%,and the cost of equity is 15%.The firm pays no taxes.
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Question

Quizplus · Accepted Answer

WACC = 0.10($600,000 / $2m) + 0.15[($2m − 600,000) / $2m] = 0.135, or 13.5%

Calculate a Firm's WACC Given That the Total Value of the Firm