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Sagot :
The firm's WACC is 11.92%.
Based on market values, the weights of debts and equities are:
debts = 1 / (4 + 1) = 20%
equity = 4 / (4 + 1) = 80%.
The cost of debt is the same as the interest rate on treasury bills, which is 3%. We can use the capital asset pricing model (CAPM) to compute the cost of equity. According to CAPM:
required return on the stock = risk free rate + beta * market risk premium = 3% + 1.0 x 11% = 14%.
WACC = 40%*3%*(1 - 40%) + 80%*14% = 11.92%.
A measurement of a company's overall cost of capital is the weighted average cost of capital. It is determined by averaging the after-tax cost of equity and debt, weighted by the market value of the firm's equity and debt, respectively.
Learn more about the weighted average cost of capital https://brainly.com/question/8287701
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