Online Learning
CLICK HERE TO ORDER YOUR ASSIGNMENT

Omega Corporation has 10 5 million shares outstanding now trading at $60 per share The firm has estimated the

Question

Omega Corporation has 10.5 million shares outstanding, now trading at $60 per share. The firm has estimated the

expected rate of return to shareholders at about 10%. It has also issued $225 million of long-term bonds at an interest rate of 7%. It pays tax at a marginal rate of 34%.

a. What is Omega’s after-tax WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

After-tax WACC %

b. What would WACC be if Omega used no debt at all? (Hint: For this problem you can assume that the firm’s overall beta [βA] is not affected by its capital structure or by the taxes saved because debt interest is tax-deductible.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

WACC %

Managerial Accounting

Omega Corporation has 10 5 million shares outstanding now trading at $60 per share The firm has estimated the