Question
Rumolt Motors has 60 million shares outstanding with a share price of $39 per share. In...
Rumolt Motors has 60 million shares outstanding with a share
price of $39 per share. In addition, Rumolt has issued bonds with
a total current market value of $3,073
million. Suppose Rumolt's equity cost of capital is 13%, and its
debt cost of capital is 9%.
a. What is Rumolt's pre-tax WACC?
b. If Rumolt's corporate tax rate is 30%, what is its after-tax WACC?
A. answer for part a = 10.73%; answer for part b = 9.20%
B. answer for part a = 9.73%; answer for part b = 10.17%
C. answer for part a = 11.02%; answer for part b = 11.03%
D. answer for part a = 9.95%; answer for part b = 9.55%
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