Ask Question
BusinessBusiness
8 January, 08:31

The WACC for a firm is 19.75 percent. You know that the firm is financed with $75 million of equity and $25 million of debt. The cost of debt capital is 7 percent. What is the cost of equity for the firm?

a. 19.75%

b. 24.00%

c. 32.50%

d. 58.00%

+3
Answers (1)
  1. 8 January, 08:43
    0
    b. 24.00%

    Explanation:

    The formula to compute WACC is shown below:

    WACC = Weightage of debt * cost of debt + (Weightage of common stock) * (cost of common stock)

    19.75% = (0.25 * 7%) + (0.75 * cost of equity)

    19.75% = 1.75% + (0.75 * cost of equity)

    18% = (0.75 * cost of equity)

    So, the cost of equity would be = 24%

    Weighted of debt = ($25 million : $100 million) = 0.25

    And, the weighted of common stock = (Common stock : total firm)

    = $75 million : $100 million

    = 0.75
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “The WACC for a firm is 19.75 percent. You know that the firm is financed with $75 million of equity and $25 million of debt. The cost of ...” 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
When the government is authorized to spend a specific amount of money, this is known as a (n) ?
Answers (1)
Don feels that inefficiency is the cause of increased costs in his production facility. Therefore, he is interested in making improvements in his factory by utilizing all the components of the facility's system: design, inputs, production processes,
Answers (1)
Share an example from your life where you had to make a choice knowing that you are giving up opportunities for doing or gaining something else ... Tell us about your thinking process and how you arrived at the final choice you made.
Answers (1)
Why would the supply curve of a dog walking business be considered elastic A. because the demand for dog walking services fluctuates B. because the supply of dog walking isnt easily expanded or reduced C.
Answers (1)
A stock is expected to pay a $0.45 dividend at the end of the year (D1 = 0.45). The dividend is expected to grow at a constant rate of 4% a year, and the stock's required rate of return is 11%.
Answers (1)
New Questions in Business
Why should you read the label on a bottle twice before using its contents?
Answers (1)
Steve is a fan of the los angeles lakers basketball team. with little provocation, he will engage you in a debate about whether it is the greatest team in basketball. what may steve be demonstrating
Answers (1)
Sally and Alicia are equal general partners In a business. They are content with their current management and tax situation but are uncomfortable with their unlimited liability.
Answers (1)
The philosophical leaders of the quality movement, Philip Crosby, W. Edwards Deming, and Joseph M. Juran, had the same general message about what it took to achieve outstanding quality. Which of the following was not part of that message? A.
Answers (1)
Joe Keho and Mike McLain share income on a 6:4 basis. They have capital balances of $90,000 and $70,000, respectively, when Linda Ronstadt is admitted to the partnership.
Answers (1)
Home » Business » The WACC for a firm is 19.75 percent. You know that the firm is financed with $75 million of equity and $25 million of debt. The cost of debt capital is 7 percent. What is the cost of equity for the firm? a. 19.75% b. 24.00% c. 32.50% d. 58.00%
Sign Up Forgot Password?