Problemomega corporation has 106 million shares outstanding, Ask an Expert

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Problem:

Omega Corporation has 10.6 million shares outstanding, now trading at $61 per share. The firm has estimated the expected rate of return to shareholders at about 12%. It has also issued long-term bonds at an interest rate of 8%. It pays tax at a marginal rate of 40%. Assume a $230 million debt issuance.

Requirements:

Question 1: What is Omega's after-tax WACC?

Question 2: How much higher would WACC be if Omega used no debt at all? Please explain in detail and also provide step by step solution.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91146562

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