Question

please show me the full steps of these 2 questions

Question & terred stock. The currentyd torty on the firms debt fo r um and preferred stock Compute the WACC of a firm that currently has 2 million in debt and 53 milion in equity and 51 mon holder require a 6.997 return. The current tax that applies to the terms 30 write you werdecimal Selected Answert 0.0707 Correct 0.77 0.001 one feedback WACC )

Answer 1

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ans 1
	We have to take post tax cost of debt as they are tax deductable
	Post tax cost of debt = 6%*(1-30%)				4.20%
	Computation of WACC
		i	ii	iii	iv=ii*iii
	Source	Value	weight	Cost	weight *cost
	Debt	2	33.33%	4.20%	1.40%
	equity	3	50.00%	9%	4.50%
	preferred stock	1	16.67%	6.997%	1.17%
		6			7.07%
	therefore answer =				0.0707
ans 2	since no tax rate therefore cost of debt = post tax cost of debt
			i	ii	iii=ii*i
	Source		weight	cost	weight *cost
	Debt		50.00%	7%	3.50%
	equity		50.00%	14.90%	7.45%
					10.95%
	therefore answer=				0.1095