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QUESTION
A private equity firm is subject to 30% income tax rate. To invest in a hotel it raises equity and debt capital (loan) at 15% and 5% costs...
A private equity firm is subject to 30% income tax rate. To invest in a hotel it raises equity and debt capital (loan) at 15% and 5% costs respectively. The debt-to-equity ratio for the project is 1.5:1.
What is the weight of debt?
What is the before tax WACC?
What is the after tax WACC?
