Omega Corporation has 11.7 million shares outstanding, nowtrading at $48 per share. The firm has estimated the expected rateof return to shareholders at about 10%. It has also issued $165million of long-term bonds at an interest rate of 9%. It pays taxat a marginal rate of 34%.
a. What is Omega’s after-tax WACC? (Do not round intermediatecalculations. Enter your answer as a percent rounded to 2 decimalplaces.) After-tax WACC = _______%
b. What would WACC be if Omega used no debt at all? (Hint: Forthis problem you can assume that the firm’s overall beta [?A] isnot affected by its capital structure or by the taxes saved becausedebt interest is tax-deductible.) (Do not round intermediatecalculations. Enter your answer as a percent rounded to 2 decimalplaces.) WACC = ________%
