New Energy’s capital structure today is $1,347 million in Long Term Debt and $1,655 million in Common Equity. If its debt were issued today, New Energy would pay an interest rate of 8.2%/year (before tax). New Energy’s Cost of Equity is estimated to be 12%/year. Given a tax rate of 30%, what is New Energy’s Weighted Average Cost of Capital (WACC)? (Your answer should be a % carried to 2 places.)

New Energy’s capital structure today is $1,347 million in Long Term Debt and $1,655 million in Common Equity. If its debt were issued today, New Energy would pay an interest rate of 8.2%/year (before tax). New Energy’s Cost of Equity is estimated to be 12%/year. Given a tax rate of 30%, what is New Energy’s Weighted Average Cost of Capital (WACC)? (Your answer should be a % carried to 2 places.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 7P

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