Question

Sip corp uses no debt. the weighted average cost of capital is 8 percent. if the current market value of the equity is 18 million and there are no taxes what is the wacc explained

Answer 1

Since there is no debt, all the capital that the company raises is in the form of common equity.

Since there is only equity (meaning the firm is a fully equity firm), the weighted average cost of capital (WACC) is nothing but the cost of equity

In this case the WACC represents the cost of equity

Therefore, cost of equity = WACC = 8%