The up-and-down company has a cost of equity of 122 a cost, Finance Basics

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The up-and-down company has a cost of equity of 122 a cost

Question: The Up-and-Down company has a cost of equity of 12.2%, a cost of debt of 8.6%, and a marginal tax rate of 40%. The current market value of its debt is $10 million and the current market value of its equity is $25 million.

a) What is Up-and-Down's weighted average cost of capital?

b) What would be the company's WACC if the amount of debt used was $20 million and equity was $15 million?

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Finance Basics: The up-and-down company has a cost of equity of 122 a cost

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