What is Company C's Weighted Average Cost of Capital (WACC) if its cost of equity is 12.0%, bond yield is 6.0%, tax rate is 40%, equity market value is $60 million, and bond market value is $40 million?

To calculate Company C's Weighted Average Cost of Capital (WACC), you need to take into account the costs of both equity and debt, along with the respective market values of equity and debt, and the tax rate.

WACC is calculated using the formula:

[

WACC = \left( \frac{E}{V} \times r_e \right) + \left( \frac{D}{V} \times r_d \times (1 - T) \right)

]

Where:

• ( E ) is the market value of equity

• ( D ) is the market value of debt

• ( V ) is the total market value (equity + debt)

• ( r_e ) is the cost of equity

• ( r_d ) is the cost of debt (bond yield)

• ( T ) is the tax rate

For Company C:

• The market value of equity (E) is $60 million.

• The market value of debt (D) is $40 million.

• The total market value (V) is ( 60 + 40 = 100 ) million.

• The cost of equity (r_e) is 12.0%.