Answer to Question #301950 in Economics for Jegr

Question

Q is financed by equity with a market value of ZMW200 million and by debt with a market value of ZMW 45 million.The interest rate is 10% on the debt which is redeemable at par in 4 years’ time. The debt was issued at a par

value of ZMW1,000 and the book value of the debt is ZMW50 million. Q pays tax on

profit at a rate of 30% per year and tax liabilities are settled in the year in which they arise.The company asset beta is 0.85 and the equity premium is 9.5%. The interest rate on Government bonds is 7%. Find WACC using market values

Answer 1

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