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WACC=Re(E/V)+Rd(1-Tc)(D/V)

Acording to CAPM

Re=Rf+(Rm-Rf)Be

Rd=Rf+(Rm-Rf)Bd

Also

Ba=(D/V)Bd+(E/V)Be

Be=[Ba-(D/V)Bd]/(E/V)

WACC=[Ba-(D/V)Bd]/(E/V)(E/V)+[Rf+(Rm-Rf)Bd](1-Tc)(D/V)

ill leave it too you to do the calculations as i really cant be botherd right now.

hope that helps. sorry i didnt know what pre tax cost is. if it isn't the risk free rate then i would use whatever the government bond coupon rate is.

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Q: Asset beta is 1.10 debt beta 0.25. market risk premium 6 in both the UK and the US. target debt-equity ratio is 4060. pre tax cost 4.5. It is 2.75 in the US.Tax rate 30. What is WACC?
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