Answered

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Inc. recently hired you as a consultant to estimate the companys WACC. You have obtained the following information.
(1) The firm's noncallable bonds mature in 20 years, have an 8.00% annual coupon, a par value of $1,000, and a market price of $1,050.00.
(2) The companys tax rate is 40%.
(3) The risk-free rate is 4.50%, the market risk premium is 5.50%, and the stocks beta is 1.20.
(4) The target capital structure consists of 35% debt, and the balance is common equity. The firm uses the CAPM to estimate the cost of equity, and it does not expect to issue any new common stock.

What is its WACC?

Sagot :

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