Ask Question
BusinessBusiness
18 April, 23:26

Miller Manufacturing has a target debt-equity ratio of. 45. Its cost of equity is 11.4 percent and its cost of debt is 6.1 percent. If the tax rate is 24 percent, what is the company's WACC?

+4
Answers (1)
  1. 18 April, 23:36
    0
    Answer:6.89%

    Explanation:

    If it's target debt to equity ratio is 0.45, the percentage of debt in its capital structure = D / D + E = 0.45 / (1 + 0.45) = 0.31 = 31%

    The percentage of equity in the capital structure = 100 - 31% = 69%

    The Weighted Average Cost of Capital = [Weight of debt * cost of debt * (1 - tax rate) ] [weight of equity * cost of equity]

    = (0.31 * 11.4% * 0.76) + (6.1% * 0.69)

    = 2.69 + 4.21 = 6.89%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Miller Manufacturing has a target debt-equity ratio of. 45. Its cost of equity is 11.4 percent and its cost of debt is 6.1 percent. If the ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
Select the correct answer. Jerry owns a small business. He has recently entered a franchise contract with a beverage company. According to the contract, Jerry's business can use the beverage company's logos and trademarks.
Answers (1)
When the price level rises, the number of dollars needed to buy a representative basket of goods: A. increases, and so the value of money rises. B. increases, and so the value of money falls. C. decreases, and so the value of money rises. D.
Answers (1)
A purchase of supplies for cash is recorded in the a. cash payments journal. b. purchases journal. c. general journal. d. cash receipts journal.
Answers (1)
The scale of a timeline is generally unimportant.
Answers (1)
If the government wishes to increase the level of real GDP, it might reduce: 
A. Taxes
B. Transfer payments
C. The size of the budget deficit
D. Its purchases of goods and services
Answers (1)
New Questions in Business
Which of the following characteristics would lead the auditor to assess control risk at a higher level? a. It is difficult for the auditor to determine or gain access to the organization or individuals who own and/or control the entity. b.
Answers (1)
The reason for the Fed being set up as an independent agency of government is to:
Answers (1)
Headings in reports that describe the content of the section and may even give a conclusion about the section are called:
Answers (1)
Coronado Company purchased land for $80,000. The company also paid $12,000 in accrued taxes on the property, incurred $5,000 to remove an old building, and received $2,000 from the salvage of the old building.
Answers (1)
Trueview video ads can be especially effective for driving what goals?
Answers (1)
Home » Business » Miller Manufacturing has a target debt-equity ratio of. 45. Its cost of equity is 11.4 percent and its cost of debt is 6.1 percent. If the tax rate is 24 percent, what is the company's WACC?
Sign Up Forgot Password?