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1. Abeer Inc. has debt claims of $400 (market value) and equity claims of $600 (market value). If the after-tax cost of debt

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Answer #1

TOTAL MARKET VALUE = MARKET VALUE OF DEBT + MARKET VALUE OF EQUITY = 400 + 600 = 1000

WEIGHT OF DEBT = 400/1000 =0.40, WEIGHT OF EQUITY = 600/1000 = 0.60

WACC = We*ke + Wd*kd = (0.60)*(17%) + (0.40)*(11%) = 14.6%

Answer : 14.6% (Thumbs up please)

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