Question

Rumolt Motors has 7575 million shares outstanding with a share price of $ 60$60 per share....

Rumolt Motors has

7575

million shares outstanding with a share price of

$ 60$60

per share. In​ addition, Rumolt has issued bonds with a total current market value of

$ 4 comma 221$4,221

million. Suppose​ Rumolt's equity cost of capital is

10 %10%​,

and its debt cost of capital is

7 %7%.

a. What is​ Rumolt's pre-tax​ WACC?

b. If​ Rumolt's corporate tax rate is

30 %30%​,

what is its​ after-tax WACC?

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