Taylor s has a beta of .78 and a debt-to-equity ratio of .2. The market rate of return is 10.6 percent, the tax rate is 34 percent, and the risk-free rate is 1.4 percent. The pretax cost of debt is 6.1 percent. What is the firm's WACC

7.82%

Explanation:

Given the following :

Beta (B) = 0.78

Debt to equity ratio = 0.2

Market rate of return (Rm) = 10.6% = 0.106

Tax rate (T) = 34% = 0.34

Risk free rate (Rf) = 1.4% = 0.014

Pretax cost of debt (Kd) = 6.1% = 0.061

WACC =

Cost of equity (Ke) = Rf + (Rm - Rf) * B

Ke = 0.014 + (0.106 - 0.014) * 0.78

Ke = 0.014 + (0.092)*0.78

Ke = 0.014 + 0.07176

Ke = 0.08576

Equity (E) = 1

Debt (D) = 0.2

Total volume of company's finance (V) = 1+0.2 = 1.2

WACC = (E/V)*Ke + (D/V)*(1 - T)*Kd

WACC = [(1/1.2)*0.08576] + [(0.2/1.2)*(1 -0.34)*0.061

WACC = [0.0714666 + 0.00671]

WACC = 0.0781766 = 0.0782 = 7.82%

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.