Suppose E-M Corp. (EMC) has perpetual earnings before interest and taxes (EBIT) of $10 million per...

Suppose E-M Corp. (EMC) has perpetual earnings before interest and taxes (EBIT) of $10 million per year. E-M’s unlevered cost of equity is 12%. EMC is subject to a corporate tax rate of 40%. It has $30 million in permanent debt in its capital structure, and the (pre-tax) cost of debt is 7% (EAR).

What is the after-tax WACC of E-M Corp.?

Select one:

7.99%

9.12%

7.79%

12.00%

14.80%

9.68%

10.49%

8.58%

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Expert Solution

jeff jeffy answered 10 months ago

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