Schedule of the costs of debt and equity for Firm Z:
If the company has target capital structure proportions of 40 percent debt and 60 percent equity, what are the break points of the company's WACC?
What is the WACC if the company wants to finance a project that costs $11 million, assuming a tax rate of 30%? (Please show all work).
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Amount of new debt (in millions)
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After-tax cost of debt
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Amount of new equity (in millions)
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Cost of equity
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New debt = $2
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2.5%
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New debt = $6
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5.5 %
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$2 < new debt = $5
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3.0%
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$6 < new debt = $8
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7.5%
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$5 < new debt
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3.5%
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$8 < new debt
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9.5%
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