Homework
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HW5.xlsxSheet1
| ABC Company WACC | |
| E(rM) | 10% |
| Cost of debt, rD | 8% |
| Corporate tax rate, TC | 30% |
| Cov(rAbby,rM) | 0.13 |
| Debt, D | 1,500,000 |
| Var(rM) | 0.11 |
| Risk-free rate, rf | 3% |
| Equity, E | 3,000,000 |
| Section a. Finding the company cost of equity. | |
| Equity beta, β | |
| Cost of equity, rE | |
| Section b. Finding the company WACC. | |
| V=D+E | |
| WACC | |
| Section c. | |
| After the IPO, the company's equity is the number of shares multiplied in the share's market value. | |
| Therefore: | |
| Equity (new), E | |
| Finding the company WACC. | |
| V=D+E | |
| WACC | |
