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Calculate the WACC for Lulia Apparel plc

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Reference no: EM133098897

Question - Calculate the weighted average cost of capital (WACC) for the following different scenarios:

A. Jamson Enterprise has 2 million shares in issue. The current market price is €10 per share. The company's debt is publicly traded on the Paris Stock Exchange and the most recent quote for its price was at 90% of face value. The debt has a total face value of €10 million and Jamson Enterprise's credit risk premium is currently 2%. The risk-free rate is 3% and the equity market risk premium is 5%. The company's beta is estimated at 1.4 and its corporate tax rate is 40%. Calculate Jamson Enterprise's WACC.

B. Lulia Apparel plc has an average market cost of borrowing of 7% per year and an equity beta of 1.2. Lulia Apparel has a consistent ratio of debt to equity of 2:1 and a tax rate of 30%. The expected return on the market portfolio is 15% and the expected risk-free rate is 4%. Calculate the WACC for Lulia Apparel plc.

Reference no: EM133098897

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