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The market value of all PTX debentures is $10 million when the market yield for PTX...

The market value of all PTX debentures is $10 million when the market yield for PTX debentures is 10.74%. The cost of equity for PTX Ltd is estimated to be 16.50% with the current market value of $30 million. The tax rate is 30%. Find the WACC for PTX Ltd.

(round the final answer to two decimal places).

Solutions

Expert Solution

market yield of debentures = 10.74% after tax cost= 10.74(1-0.3)= 7.518% COST OF EQUITY=16.5%

WACC= 10 * 7.518% + 30* 16.5%/ 10 + 30= 0.7518+4.95/40=0.1425*100= 14.25%

jeff jeffy answered 2 years ago
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