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What is the wacc for this company

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Reference no: EM133160506

Question - Company A has £15 million of long-term finance, which is made up of £6 million of debt and £9 million of equity. The required return from debtholders is 7% and shareholders are 12% and the tax rate is 30%.

Required -

a. What is the WACC for this company?

b. What happens to the WACC if an additional £3 million of debt is acquired? Explain why the WACC changed?

c. What happens to the WACC if the original mix of debt and equity was changed with a decrease in debt of £3 million and an increase in £3 million of equity? Explain why the WACC changed?

Reference no: EM133160506

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