New calculation of the WACC for the company

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Reference no: EM131859610

1. XYZ Co. issues $1,000 par value, 8.4% semiannual coupon bonds, with 15 years to maturity. The company sells the bonds for $750. Find the after-tax cost of debt assuming a tax rate of 35%. A. 9.98 B. 7.83 C. 8.32 D. 6.02.

2. The CEO of XYZ Co. has demanded a new calculation of the WACC for the company. The capital structure consists of 65% equity and 35% debt. The cost of equity is 13% and the pre-tax cost of debt is 6.55%. With a marginal tax rate of 39%, what is the WACC? A. 9.85 B. 10.66 C. 8.56 D. 5.70.

Reference no: EM131859610

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