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Re: ::: vuaskari.com ::: FIN622 GDB IDEA SOLUTION BY ASHAR ALI AND RECHEKED TOO

9.28 to 7.56, sorry just a typing error

On Mon, May 30, 2011 at 11:12 AM, mc090410560 Mariam Iftekhar <mc090410560@vu.edu.pk> wrote:
I have the same solution. Trend of WACC with increasing D/E ratio =        decreasing.
This means that as we increase the D/E ratio, WACC decreases as we see when we increase the ratio from 0.5 to 2,WACC decreases from 9.42 to 7.56. This happens due to tax advantage of increasing the amount of debt .

On Mon, May 30, 2011 at 8:22 AM, mc100205817 Sadia Saeed <mc100205817@vu.edu.pk> wrote:
http://en.wikipedia.org/wiki/Modigliani%E2%80%93Miller_theorem
in this link increasing in debt to equity WACC will remain constant.. plz guide me..



On Mon, May 30, 2011 at 9:11 AM, mc100205817 Sadia Saeed <mc100205817@vu.edu.pk> wrote:
Increase in Debt or Debt-equity Ratio decreases the WACC
Binish: plz give the reference of this.. this increasing or decreasing is much confusing.


On Sun, May 29, 2011 at 8:41 PM, mc100201622 Fizza Jabeen <mc100201622@vu.edu.pk> wrote:
can u tel me ya highlight valuse kasy ai?



WACC if the Debt-equity Ratio of Company is .5
WACC=.11(1/1.5) + .09(.5/1.5)(1-.35)
WACC=.11(.666666666) + .09(.333333333)(.65)
WACC=.073333333 + .03(.65)
WACC=.073333333 + .0195
WACC=.092833333
WACC=9.28%
WACC if the Debt-equity Ratio of Company is 1.0
WACC=.11(1/2) + .09(1/2)(1-.35)
WACC=.11(.5) + .09(.5) (.65)
WACC=.055 + ..045(.65)
WACC=.055+.02925
WACC=.08425
WACC=8.42%
WACC if the Debt-Equity Ratio of Company is 2.0
WACC=.11(1/3) + .09(2/3)(1-.35)
WACC=.11(.333333333) + .09(.666666666)(.65)
WACC=.036666666 + .06(.65)
WACC=.036666666 + .039
WACC=.075666666
WACC=7.56%
Trend of WACC With increasing D/E Ratio
Increase in Debt or Debt-equity Ratio decreases the WACC
agar thek hai then tell me aur agar wrong hai then also tell me i m waitng ur reply 
this soulation is 100% correct i check it my self......

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