Results 1 to 2 of 2

Math Help - Beta, WACC stuff, need a little help :)

  1. #1
    Junior Member
    Joined
    Oct 2008
    Posts
    57
    Thanks
    1

    Beta, WACC stuff, need a little help :)

    Beta = 1.5
    gearing - 30%
    cost of debt = 7%
    risk free = 4%
    market risk = 6%
    corp tax = 40%




    At 30% gearing whats the pre tax and after tax wacc?



    ------


    thats the question im facing and i can get as far as the wacc


    I first found the cost of equity


    Rf + B ( Rm-Rf

    0.04 + 1.5 (0.06 - 0.04) = 0.07 or (7%)



    but i get stuck on the WACC section


    Ke(We) + Kd(Wd)


    i have this 0.07(70%) + (0.07)(30%)



    where the 70% comes from (gearing% (30 - 100))


    And ther Kd (0.07) comes from the cost of debt? (am i right here)


    so am i right in saying WACC before tax = 0.07 or 7% ???
    Follow Math Help Forum on Facebook and Google+

  2. #2
    Newbie
    Joined
    Jan 2009
    Posts
    5
    You've worked out the WACC without tax.

    The formula for WACC with tax (corporate tax) is:

    WACC = Ke(We) + KdWd(1 - Tc)

    Where Tc is the corporate tax
    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. Cost of debt for use in WACC calculation
    Posted in the Business Math Forum
    Replies: 0
    Last Post: April 16th 2010, 05:04 PM
  2. Beta Distribution
    Posted in the Advanced Statistics Forum
    Replies: 1
    Last Post: December 7th 2009, 09:23 PM
  3. Beta pdf
    Posted in the Advanced Statistics Forum
    Replies: 1
    Last Post: October 27th 2009, 07:35 PM
  4. derive cos(alpha+beta) sin(alpha+beta)?
    Posted in the Trigonometry Forum
    Replies: 3
    Last Post: December 7th 2008, 04:27 PM
  5. Calculating target capital and WACC
    Posted in the Business Math Forum
    Replies: 0
    Last Post: November 5th 2007, 08:28 PM

Search Tags


/mathhelpforum @mathhelpforum