What would wacc be if omega used no debt at all

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Omega Corporation has 11.1 million shares outstanding, now trading at $54 per share. The firm has estimated the expected rate of return to shareholders at about 10%. It has also issued $195 million of long-term bonds at an interest rate of 8%. It pays tax at a marginal rate of 30%.

a. What is Omega's after-tax WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b. What would WACC be if Omega used no debt at all? (Hint: For this problem you can assume that the firm's overall beta [βA] is not affected by its capital structure or by the taxes saved because debt interest is tax-deductible.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Reference no: EM132317119

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