You would like to estimate the weighted average cost of capital for a new airline business. based on its industry asset beta, you have already estimated an unlevered cost of capital for the firm of 9%. however, the new business will be 25% debt financed, and you anticipate its debt cost of capital will be 6%. if its corporate tax rate is 40%, what is your estimate of its wacc?

7.65%

Explanation:

WACC = wE*rE + wD*rd(1-tax)

wE= weight of equity = (100% - 25%) = 75%

rE = cost of equity = 9% or 0.09

wD = weight of debt = 25% or 0.25

rd = pretax cost of debt = 6% or 0.06

tax = 40%

WACC = (0.75 *0.09) + [0.25 *0.06(1-0.40) ]

WACC = 0.0675 + 0.009

WACC = 0.0765 or 7.65%

a.

answer; ///(d); determining who competes most closely   with whom evaluating whether industry driving forces and competitive pressure favor some strategic groups and hurt others, and ascertaining whether the profit potential of different strategic groups varies due to the strengths and weaknesses in each groups respective market positions;