of the work you have done so far is correct you may not have

of the work you have done so far is correct, you may not have completed everything value 6.66 points Omega Corporation has 10.9 million shares outstanding, now trading at $64 per share. The firm has estimated the expected rate of return to shareholders at about 15%, it has also issued $245 million of long- term bonds at an interest rate of 6% 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 1% 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 [BA] 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

Solution

WACC = 12.13%

b. If all is equity then WACC = cost of equity = 15%

	Amount	weight	cost	weight*cost
equity	697.60	0.7401	15.0000%	0.1110
debt	245.00	0.2599	3.9600%	0.0103